Asset protection is a strategy to reduce your personal exposure to potential future liability. Think of it like insurance. It’s a plan to discourage lawsuits and reduce potential liability to a future creditor.
Transcripts:
Colin Ley: Hello. Colin and Shreya Ley here of LayRoots, and today we’re going to be talking about what is asset protection.
Shreya Ley: Yes, we are.
Colin Ley: That’s a great question, and-
Shreya Ley: It can mean a lot of things to a lot of people.
Colin Ley: Yes.
Shreya Ley: As we see from our online contact form submissions.
Colin Ley: Yes. And on a quick note on that, it is not about creating fake identities and removing people secretly from the country. That was my favorite submission. But asset protection, Shreya Ley, since you are asking-
Shreya Ley: I am asking.
Colin Ley: … is about actions you can take to reduce exposure of your personal assets from both business and investment activities.
Shreya Ley: Okay.
Colin Ley: It’s a scary world out there.
Shreya Ley: It is. And I wish that someone had told us that when we were starting an oil and gas consulting company and we were interested in asset protection. Well, we were starting it with my father, and we were going up against the big guys, and we were concerned about our law firm business, about the patents that we had in the consulting business, and the advice that we got then was to just come back when we had $30 million.
Colin Ley: Yeah, and that didn’t make us feel very good.
Shreya Ley: It didn’t because what about all that time until we made our $30 million? We’re still waiting for that day.
Colin Ley: Yeah. So, the asset protection planning is kind of like a form of insurance, right? You’re investing in a strategy and actions that will help reduce the risk of those business liabilities spilling over to your personal assets. It’s a way to discourage lawsuits and minimize potential losses to creditors.
Shreya Ley: What are some ways in which I, a normal human being, can take action?
Colin Ley: Well, we’ll get to that in the future, Shreya Ley.
Shreya Ley: Oh, okay.
Colin Ley: Yeah. Today we just want to jump in and cover the general topic, but there are a couple of different types of liability that people are concerned about or should be concerned about. You may have heard of inside liability and outside liability.
Shreya Ley: Oh, yeah. That’s a super popular topic on our website.
Colin Ley: It is. It is actually the most popular page on our website. So, to give a general definition of it, inside liability can also be thought of as business liability, like liability from actions within your business or maybe you have an investment property. Somebody slips and falls at your rental; that is considered an inside liability or a business liability.
And outside liability is also known as personal liability. So, the most common type of example for this would be a car wreck or a car accident. Some bicyclist jumps out in front of your car, and you clip them, they go down, and they sue you for emotional damages, for their destroyed bike, stuff like that. I know because I’ve been scarred. I have emotional scars. No, not really. But those are the different types of liability-
Shreya Ley: And the reason why the outside liability is important is because let’s say you get into that car accident, and then they try and come after your assets, some of which might be these investment properties or business assets ownership that you might have.
Colin Ley: Yeah. So, once you have an outside or personal liability problem, then essentially all of your assets are on the line, so your personal home, possibly retirement accounts, investment accounts, your businesses, other businesses, other rental properties, whatever you have that’s in your own name, things that you own, those could all be lost to creditors, and to some people, that’s a scary thought.
Shreya Ley: Yeah, and it’s worth investing in minimizing the potential damage that could cause.
Colin Ley: Exactly. Well, thanks, Shreya, and thanks for watching. If you found this video helpful, maybe give it a like below or share it with your friends. We would really appreciate that.
Shreya Ley: Yeah.
Colin Ley: Take care.
