There are certain phrases that sound really good in theory yet don’t work out so well when it comes to putting them into practice. One of those phrases is, “set it and forget it.” While it would be nice to be able to simply take care of something one time and never have to think about it again, it most certainly doesn’t always work that way. Sure, there may be specific limited instances where it can work out but the concept is by no means universal. Let me give you an example of what I’m talking about.
For years, I’ve referred to one of the obstacles to the wealth protection planning process as the “vaccination theory” of approaching the endeavor. What I mean by that is that people often treat the process akin to the way that they treat getting their vaccinations against things such as polio or measles. In that approach, all they have to do is get the initial vaccine shot, and they don’t have to worry about it again. The thought is that once the vaccine has been administered, the threat of contracting these viruses is eradicated and no longer needs to be considered or addressed.
This has been an effective method of explaining things when people consider it in connection with a polio vaccine but it’s proven to be less effective in the age of COVID vaccinations and the purported need for booster shots to maintain coverage or prevention. Either way, the point remains that when it comes to implementing a wealth protection plan, it’s not something that can be established one time and never thought about again. The reality is that it requires ongoing continued monitoring and maintenance.
As marketers, this is something that most people are familiar with when it comes to putting an effective marketing plan together. Any astute marketing operative realizes that just because a particular strategy may have been put in place initially and may have produced a certain result does not mean that it will continue to produce the same result ad infinitum. This approach may be promoted by some of the less reputable marketing coaches out there but it simply doesn’t work. The reality is that a truly effective marketing strategy has to be monitored, measured, and adjusted as circumstances change. For instance, when one of the platforms changes its algorithm, the entire marketing campaign may need to be completely revamped. At a minimum, it will need to be assessed and adjusted to work with the changes inherent in the change on the platform. While this is no secret to those who understand the world of marketing, for some reason the concept gets lost when transitioning into the world of wealth protection planning.
For many people, strategies can make sense to them when they are dealing with the field that they are familiar working in but seem strange when they are dealing with a different area. When I work with clients and students on their wealth protection plans, the first thing that I look at is what type of a structure that they currently have in place in order to determine if it is sufficient to accomplish their objectives. Many times, they tell me that they think that they are in good shape because perhaps they have established an entity already. The operative word in that last sentence is an. Anytime someone tells me that they’ve set up an entity, the implication is that they have set up one. This further tells me that the strategy that they are employing is one which effectively places all of their eggs in one basket.
The better approach is to implement a strategy of “isolation and insulation” whereby the multiple eggs are divided up and isolated into different baskets so as to insulate them from the potential li- ability of the other eggs and/or the other baskets. For wealth protection planning purposes, this means that different assets and activities are separated into different legal entities so that in the event that something occurs which exposes one legal entity to liability, we are not facing the risk of losing all of the assets since they are protected through other separate entities.
As you can imagine, over the years people’s situations change. Ideally, the change is in the form of an increase in one’s assets, activities, and profitability. As such, there is a need for adding greater levels and layers of protection to safeguard the additional assets, income, and estate value. If the “set it and forget it” approach is utilized, the plan will not provide the levels of protection necessary for safeguarding the growth because that’s not what it was designed to protect. No, an adjustment is essential.
One of the reasons that I wanted to provide this particular thought in this article is because we’ve come to the start of another year. The end of the year and/or the start of a new year are great times to assess or reassess the state of your plan to determine if it is adequately designed and structured to enable you to accomplish your wealth protection objectives.
Some questions to ask yourself are:
- Do I currently have enough entities to protect the amount of my assets, equity, and estate value? (Translation: Do I currently have too many eggs in one basket?)
- Is my income effectively sheltered from taxes?
- Do I have my various businesses divided into different entities to protect against prospective liability?
- Have I kept the appropriate documentation to substantiate the business that I’ve conducted in my entities?
- Does my current estate plan adequately address my current circumstances?
- Is my plan for what happens upon my death still make sense?
While there are many other considerations, these are some to start with. If you’re not sure of the answers to these questions or if you need assistance in evaluating the state of your protection plan affairs, my team and I are happy to assist you. Through our various program, services, and other offerings, we help people to implement plans for safeguarding their assets without the complication, confusion, and cost so often associated with the process. We’re happy to help you as well. If you’d like more information on how we may do so, feel free to send me an email to firstname.lastname@example.org.
Although the information in this article is a good start, it’s up to you to take action on making sure that your plan is sufficient. Do what it takes to review your circumstances and your plan to figure out where you stand. Do what it takes to cover your assets.