When you’re faced with a lawsuit, regardless of whether you’re at fault for the charges, it can be a very stressful situation both personally and professionally. Especially if you’re a small business owner, one lawsuit could completely ruin your company as well as your personal finances if you’re not careful. Because there’s so much as risk in circumstances such as these, it’s important to know how you can best protect yourself and your money from legal proceedings. To help you in this area, here are three financial rules you should be following that can help protect you from a lawsuit.
Use Liability Insurance
One of the best things you can do to help protect your money and other assets from future potential lawsuits is to get yourself insured. By having liability insurance for both sums of money and physical assets, you have protection from those things being taken without any type of reimbursement. Robert Pagliarini, a contributor to Forbes.com, suggests always making sure that your liability insurance covers your entire net worth. This means that if you get a large sum of money or an expensive asset, you should be talking to your insurance broker about upping your liability insurance to ensure that everything you have or own is covered.
Separate Your Personal and Professional Assets
If you have any type of professional assets, whether it be a small company or another type of business-related asset, it’s important to always keep that separate from your personal finances or assets. Jason Van Steenwyk, a contributor to MoneyCrashers.com, shares that if you fail to use a business entity and your business gets sued, both your personal and professional assets could be in jeopardy. However, if you had the forethought to keep your work and personal lives separate with regards to finances, your personal fortunes won’t be impacted by professional disputes.
Know What Assets Your State Protects
Paul Sullivan, a contributor to the New York Times, shares that in some states, certain types of assets are automatically protected from lawsuits so that the persons involved won’t be entirely ruined should they lose in a legal battle. Knowing this, it’s a good idea to do some research as to what, if anything, your state chooses to help you protect in the face of legal matters. Some things you may find that your state protects could include your physical home or the equity in your home. Retirement plans, 401(k)s, and personal insurance plans may also be protected in some states. Once you know how your state can help you protect your wealth, you can better strategize your own personal plan for wealth protection.
If you’re concerned about how to best protect your wealth from legal proceedings, use the tips mentioned above to help you preserve the assets you have.