Building Your Fortress
Using Smart Financial Tools to Protect Your Assets Against Potentially Damaging Life Events
Sometimes, even when you think you're absolutely prepared, life takes a turn you didn't expect. You can protect your personal assets from life's unexpected events with some advance planning.
Before you enter into any agreement that could put your assets at risk—from marriage, investments, or business ownership to property acquisition—team with a financial advisor and an attorney to evaluate the following strategies for preserving what's yours.
Preparing for Marriage
For individuals and families with considerable assets, a month before the ceremony is a critical time to put financial safeguards in place.
- Discuss a prenuptial agreement. All prenup terms should be discussed and agreed to at least one month before the ceremony, and both parties should have legal representation to ensure that the contract is enforceable.
- Consider an asset protection trust. Trusts are becoming more attractive because a number of states have relaxed their planning laws. These instruments can be set up anonymously to avoid causing any friction between the couple. Don't wait; if you own a business, it's vital that you transfer it into a trust to establish your business as separate property before you marry. This will nearly guarantee that your assets are protected if your marital status should change.
- Create an extra layer of protection with a foreign asset protection trust. Its assets are managed through a foreign LLC. Set up correctly, the trust owns the LLC and you manage it.
After the Ceremony
- Hold a family board meeting twice a year. Commit to communicate. Family members should meet as a group with a financial advisor to understand current financial circumstances and voice opinions for major financial decisions.
During divorce, financial assets, businesses and income-generating properties are assessed and divided. You'll want to employ a support team—both your financial advisor and your lawyer—to account for all marital property, ensuring full disclosure and a fair division.
- Account for all debts. Anything your spouse accrued during your marriage could haunt you when creditors are looking to collect. Be sure to track down:
- Home mortgages or leases
- Auto loans or leases
- Credit card debts
- Installment loans (appliances, home improvements)
- Co-signed Loans
- Business or farm loans
- Freeze all credit cards and joint accounts as soon as possible. Both spouses will be accountable later for any debts incurred now.
C-Level Job Transitions
Any change in your employment—especially at the executive, CEO or ownership level—will likely affect your lifestyle. You can smooth the transition by considering a few practicalities.
- Understand your expected compensation. Executive compensation performance incentives and tax benefits can vary greatly. Beyond cash compensation, consider and discuss option grants, deferred compensation, long-term incentive plans (typically conditional company shares in which performance increases shareholder value) and executive perks.
- Negotiate valuable but lesser-known esecutive prerequisites
- Restricted stock
- Loan to purchase restricted stock
- Loan to pay taxes
- Loan to purchase a home
- Loan forgiveness
- Supplemental executive medical or life insurance
- Estate planning services
- Company plane or car
- First-class air travel
- College tuition for children
- Tax gross-ups for taxable benefits
- Golden parachute provisions
- Termination provisions
- Avoid gaps in your healthcare coverage. Have health screenings or optional medical procedures while still covered by your current plan, especially if you have a pre-existing condition for which you have received medical advice, diagnosis, care or treatment within the last six months. Learn more about the Portability of Health Coverage and HIPPA.
Losing a Loved One/Managing an Inheritance
Careful preparation can make this time a little less stressful now and a lot less financially painful later. Make the time to assemble a team of financial professionals long before you need them.
- Investment Advisor – Will you inherit investments? How comfortable are you with the level of risk they present? An advisor can look at how new funds and investments fit with your current long-range plans, ensure that your beneficiaries are named and up to date on IRAs, and verify that your securities accounts are registered as Transfer-on-Death so that your assets avoid probate.
- Certified Public Accountant (CPA) – Does any of the inheritance qualify as income? Will you be required to pay taxes on or take required withdrawals from an inherited IRA or 401(k)? What about property taxes on an inherited home? A CPA can help you navigate any new tax assessments.
- Attorney – Will you move into a higher net worth category? Could you be an attractive target for litigation? Attorneys and qualified investment advisors can recommend umbrella insurance or liability coverage, help you receive appropriate life insurance payouts, and prepare wills and trusts to manage your loved ones' assets.
- Insurance Agent – If you're inheriting antiques, collectibles and other tangible assets, you may need additional insurance.
Ready to Take Action?
Your financial plan should be reviewed regularly, as often as every three or four years. If children, health, business status, divorce or any of life's other major events changes your financial situation, you may want to review your plan more often. Tax, liability and estate laws are very complex and always changing, but the consequences of being unprepared are costly.
Your BB&T advisor can coordinate with your legal, tax and other outside advisors to ensure you have the best plan in place to fit your needs and goals.
Email an advisor or call us at 800-388-3085.