No matter what life sends your way, you need to keep your assets safe. You can do this through a California Power of Attorney and a range of other state-specific legal strategies. In this guide, we look at how to protect your assets in California in any situation.
The Importance of Keeping Your Property Safe
At any time, a serious situation could erupt and leave you without your property. For example, if your business fails, you may have liabilities that take your belongings away. Lawsuits, justifiable or otherwise, can also end with you losing assets.
You even have to prepare for major medical emergencies, such as a coma. You should already have a vague idea of who’ll take over your assets until you’re back to full health. By the time a crisis like this happens, it might be too late to arrange.
For this reason alone, you need to get ahead of these situations. Everything you own may be on the line if you don’t sort out your affairs.
Ways To Secure Your Assets
You can use one of these strategies or mix and match, or you can do whatever works for you. The specifics of your assets might also be a factor. Here are the main ways you can protect your California property.
Trusts
You can place your assets in a trust to safeguard them from creditors and debtors. They’ll then go to a trustee — a person or organization who manages it. However, a revocable trust (one you can change at any time) won’t fully protect your assets from creditors.
For maximum protection, you’ll need an irrevocable trust, which you can’t change on a whim. In these arrangements, the trustee is almost always someone other than yourself. This separation between the trust and the ‘settlor’ is what keeps your property safe from debt collection.
Your trustee must be someone who will act in your best interests — even if you don’t control the trust itself. This can be a professional trustee. These independent experts help you navigate any situation while keeping your assets free from risk.
Private Retirement Plans
A private retirement plan can protect your funds and assets even from bankruptcy. You’ll have to retitle your property as ‘retirement assets’ and appoint an independent trustee. These programs are specific to California and form part of the state’s Code of Civil Procedure.
A California PRP is definitely helpful for keeping everything safe. However, you must set this up specifically as a retirement plan — and not to avoid creditors. The plan’s protection may even be invalid if a court believes debt evasion is your main goal.
Federal retirement plans use pre-tax earnings and come with clear funding limits. However, your California PRP comes from your after-tax balances, with no limits to stress about. As you’re not transferring your assets, many people see these plans as the best form of protection.
Power of Attorney
Your power of attorney can give control of your finances to a family member (or anyone else you trust) in an emergency. They’ll make decisions and major transactions on your behalf when you aren’t able to. However, they must follow the rules you set out the entire time.
If you own a business, the agent can even take charge of it in your name. This ensures nobody else takes control of your company assets or misuses them in any way. To guarantee the agent follows certain rules, consider a ‘limited’ power of attorney. These are much more specific about what they can and can’t do with your assets.
Use a California-specific online template for your power of attorney form. Otherwise, it might not meet the state’s requirements. For example, in addition to yourself and the agent, you need two witnesses and a notary to sign the document.
Limited Liability Companies
Setting up an LLC means you aren’t personally liable for business debts. However, you’ll still get all the usual benefits of a company partnership (with fewer formalities). This follows many of the same steps as making any other organization, such as writing an operating agreement.
Your LLC will be a separate (and fully independent) legal entity. However, creditors can still take any property or assets you transfer to the business. The LLC can also only protect you through high-risk business ventures. If debts pile up outside this context, you’ll still be fully liable.
Family Limited Partnerships are another route you could take if family members are helping with the company. However, this protection is only for limited partners. General partners will still be liable for their debts.
Conclusion
The type of assets you want to keep safe will affect which of these routes works best for you. No matter your choice, you’ll need accurate documents to make sure your property has protection. You also have to check that the forms you fill out always fit within California’s state laws.