Bad things happen, even in Fort Collins, Colorado. When bad things happen there can be devastating financial consequences that can make even a very rich person penniless. So, what can a person do to plan for a catastrophic event?
#1. Do not skimp on insurance. Buy the best health insurance you can afford. Make sure that your home and possessions are insured so that they will be fully replaced if damaged. Consider flood insurance for your home and other real estate. Have plenty of liability insurance at home and professionally.
#2. Periodically review your assets and determine what are the best strategies to protect them.
Here are some things to consider:
A. If you have more than enough assets to provide for yourself and your spouse, consider transferring some of the excess to adult children and charities. If you no longer own the assets, then you cannot lose them because of some unforeseen calamity.
B. In Colorado and in many other states, retirement funds are exempt from creditors. That means that if you do have a problem, your creditors can not get your retirement funds. By contrast, if that same money was in a bank account, your creditors would have no problem taking that money.
C. You can use entities such as limited liability companies to invest your money. If you keep your personal and each entity's money and business absolutely separate, then in the best case a problem may be isolated, and a creditor may not be able to successfully take anything of value from the limited liability company because of restrictions regarding charging orders.
D. If you have assets in excess of ten million dollars you may want to consider having you assets kept outside of the United States in a jurisdiction that is not as friendly to creditors. There is nothing magic in the $10,000,000.00 figure, but it is probably a useful benchmark, since taking money is so expensive, you need to have a large sum to make it a cost effective alternative.
THE MOST IMPORTANT THING TO KNOW IS, that once someone sues you or after you incur a debt, it is likely too late to do anything. Our courts prevent fraud, and that includes fraud on creditors. So, once you incur a debt, it is usually too late to move your assets around to make it difficult or impossible for that creditor to recover its loss. ON THE OTHER HAND, before you have that big creditor, there is absolutely nothing wrong in using the strategies noted above along with other legal strategies to make some or all of your assets difficult or impossible for creditors to take.