While most people assume only the uber wealthy need to worry about asset protection, those with less wealth and fewer assets may be at even greater risk. For example, if you’re a multi-millionaire, a $50,000 judgment against you might not be that big of a burden. But for a family with a modest income, home, and savings, it could be catastrophic.

Asset protection planning isn’t something you can put off until something happens. Like all planning, to be effective, you must have asset protection strategies in place well before something happens. 

So what is asset protection, exactly? There are numerous planning strategies available, but four of the most common include the following:

1. Insurance
Purchasing different forms of insurance—health, auto, watercraft, and homeowner’s—should always be the first line of defense to protect your assets. Whether you’re ultimately found at fault or not, if you’re ever sued, defending yourself in court can be extremely costly.

2. Statutory exemptions

Another way to protect your family’s assets is by taking full advantage of federal and state laws that make certain types of assets “exempt” from creditor claims and judgments. Depending on your state, the availability and amount of protection offered by such exemptions can vary. For example, federal and state laws classify many retirement plans, such as 401ks and IRAs, as exempt assets, while some states also offer significant, or complete, exemptions for life insurance policies and annuities, as well.

3. Business entities
Owning a business can be an incredible wealth-generating asset for your family, but it can also be a serious liability. Indeed, without the proper protection, your personal assets are extremely vulnerable if your company ever runs into trouble.  If you own any kind of business, even just a side gig to earn extra income, you should seriously consider creating a protective entity to ensure any liabilities incurred by your company won’t affect your personal assets.  

4. Estate Planning
While each of the asset-protection scenarios shared above are “maybes,” there is one certainty in life—death. It’s coming for all of us. And your death, or an incapacity before it, is the biggest risk to your family’s assets. Planning in advance for what is certain to come is a gift to the people you love the most.