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Best way to protect assets and ensure loved ones are secure

August 4, 2020
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Why do you need asset protection?

Asset protection helps people ensure that their assets are protected against seizure or other forms of loss by, for example, establishing an irrevocable trust to protect personal or business assets against the claims of creditors.

But most importantly, asset protection helps to keep your assets in your hands, or in the hands of your family if anything happens to you.

Asset protection helps to keep your assets in your hands, or in the hands of your family if anything happens to you.

We have already reviewed, in detail, various ways to protect your assets in our blog “Asset protection and why you absolutely need it”. Let’s briefly recap it.

In a very practical sense, asset protection includes these basic steps:

  • cataloging your assets in a secure repository
  • tracking your assets, for example, updating them whenever you add a new asset or there is a change in existing assets
  • ensuring the beneficiaries you designate will be aware of your assets so that they can identify and locate them and, as a result, claim ownership
  • plying technical, financial, legal or other tools to protect your assets in the case of an unforeseen event.

It’s important to note that asset protection applies not only to personal assets but also to business assets. This can be very valuable for business owners. For example, they can set up a trust to protect the business assets of their limited liability company (LLC) or other business entity.

Financial service companies can extend these steps with additional features such as asset management to increase your net worth, but the above steps represent the basic minimum that asset owners need to take to ensure the protection of their assets..

The most common asset protection tools in the United States and globally are:

  • asset protection trusts (e.g., an irrevocable trust to protect against potential creditors) 
  • insurance policies
  • family limited partnerships (FLPs)

These tools aim to ensure that your assets are protected, but they hide some major risks. Let’s review them.

What are the biggest risks for your loved ones

Using the traditional asset protection tools requires a lot of time, effort, and money. But apart from that, you will notice that the most common asset protection tools target primarily external risks. For example, the insurance policy for real estate can protect it against natural disasters, and irrevocable trusts can protect your assets against the claims of creditors in the case of bankruptcy.

But all these asset protection tools fall short when it comes to personal risks – for example, your heirs being unaware of and unable to locate your insurance policy, company stocks, bank account or other assets. 

Let’s take a simple example. You take out life insurance and you name your spouse or children as beneficiaries. You think you’ve secured peace of mind; you believe your family would be secure if anything happened to you. You couldn’t be more wrong.
You might be surprised to learn that insurance companies don’t have a legal obligation to proactively notify your beneficiaries! Yes, you read that correctly – they will know that something has happened to you, they will know who your beneficiaries are, appointed in the policy by you, but they are not required to notify them! So your spouse or children might never become aware of that policy and benefit from it.

Insurance companies don’t have the legal obligation to proactively notify your beneficiaries if anything were to happen to you.

As you will see below, we are talking about billions of dollars in the US alone that don’t reach the beneficiaries but remain unclaimed in institutions – banks, insurance providers, and asset management companies.
This is, indeed, one of the biggest risks for your loved ones – that they won’t be aware of your assets, won’t be able to identify and locate them, and, as a result, won’t be able to claim them.

How big is the problem?

The famous Californian attorney James L. Cunningham, Jr. puts it well in his book Savvy Estate Planning: “According to CBS News, about $1 billion in life insurance claims goes unpaid every year. That’s because even though the insurance company knows you are dead, they have no affirmative obligation to reach out and pay the money to your beneficiaries.”

The beneficiary has to submit a claim, but if the beneficiary doesn’t know about the policy, that claim will never be submitted. The insurance company knows you have passed, they know who the beneficiary is, but if no one steps forward, the company holds on to the money. I find this shocking.”
$1 billion per year
just in the United States and only for life insurance. How big is the problem of protecting all types of assets from these risks? It’s huge. So-called unclaimed assets approach $100B in the US alone. Latest reports for the UK show £77B. Globally, we are talking about trillions of dollars. And the upward trend is alarming – a $5B increase per year in the USA alone.

How people manage the risks

So how do people protect their assets from these personal risks, for example, forgetting about an asset, heirs not being able to locate an asset, or an asset protection tool, such as an insurance company, failing to notify your heir about the asset?

Here are the most common protection techniques that people employ against these risks:

  • storing the information on the hard drive of their personal computer
  • printing it out on paper and storing it in a secure place at home or at the office
  • using a digital vault
  • storing the information on Excel or Google Sheets.

You can’t fail to notice that while the protection tools relating to external risks are quite sophisticated, the tools used to protect your assets from personal risks are all over the place. And most importantly, they fail to cover against some very important personal risks:

  • These options would fall short if anything happened simultaneously to you AND your partner, with whom you’ve shared the asset information.
  • The people with whom you share the information about your assets might forget how to access it.
  • The people with whom you share the information about your assets might be too young or too old to remember the access instructions.
  • And most importantly, the above asset protection tools don’t give you the option to allow access ONLY if something happens to you, not before.

Why traditional asset protection tools don’t work

There are fundamental flaws in the traditional asset protection tools which, in many cases, prevent these assets from reaching your family and loved ones if something happens to you. Let’s review these flaws.

Outdated assets catalogs

A big problem related to traditional asset protection tools is that they soon become outdated. Let’s take trusts, for example. One sunny day you decide to protect your assets by creating a living trust.
You find a good attorney, list all your assets, sign the papers, and you are ready – your assets are protected. The reality is that they are not.
The reason is that assets are dynamic. Take a second to think what assets you have now and what assets you had 15 years ago. The two lists are very different, right? Yes, assets change continuously.

Establishing a trust is an expensive and bureaucratic process, and it is impossible to spend all that time and money with an attorney to continually keep your trust up to date for the next several decades. As a result, quite often when beneficiaries get access to a trust established by a family member 30 years ago, they are unpleasantly surprised that it’s of no value: the assets listed in the trust documents are no longer valid, while the new assets aren’t listed.

Beneficiaries unaware of the assets or unable to locate them

Another big problem is that traditional asset protection tools focus primarily on protecting the value of the asset but not the ownership of the asset.

Traditional asset protection tools such as insurance policies focus on protecting the value of the asset but not the ownership.

For example, insuring real estate protects against climate disasters. A bank can protect your savings account up to a certain amount. But all these asset protection tools do not guarantee or target proactively the protection of asset ownership.

Did the insurance company that provided your life insurance tell you how they would identify and notify your heirs if the insurance was triggered? Did your bank tell you how they would identify and notify your heirs if you abandoned your bank account?

You might be surprised that, for most asset protection tools, the answers to the above questions are somewhat negative. And the reason is that they aim primarily to protect the asset value but not the asset ownership. The more blunt answer is they don’t have any incentive to notify your heirs.

You would certainly not be happy knowing that your asset had preserved its value but was not in the hands of your family.

Traditional asset protection tools support only specific asset types, not all

Another problem related to traditional asset protection tools is that they protect certain assets types, but not all. If you have insurance for your real estate, it protects only the real estate. Even if you have established a trust, certain assets such as life insurances can’t go into your trust.

Many traditional asset protection tools are expensive.

Some of them can actually be very expensive. For example, attorneys who provide estate planning have different charging models, but quite often their charge is based on the value of the assets that you want to protect. In these cases, the cost can skyrocket.

Even attorneys who charge fixed fees are quite pricey, and these fees are deep into 5 figures. When you combine this with the fact that a catalog of assets rapidly becomes outdated, the value of such estate planning becomes questionable.

So how, then, we should implement asset protection?

With the DGLegacy application, you can protect your assets against unforeseen events and ensure your family is secure. You can connect your preferred beneficiary with your preferred assets, and they will be notified at the time you choose – while ensuring they get the support they need in the process of claiming.

With DGLegacy, you can protect all types of assets. It is also easy to keep your list of assets and beneficiaries up to date.

This way, in the case of an unforeseen event, your loved ones:

  • are aware of your assets
  • can identify and locate your assets
  • can minimize the chance of unclaimed assets

This is achieved through the following easy steps:

Catalog your assets

You catalog the assets that you want to protect via DGLegacy, providing the minimum basic information about the assets that will allow your beneficiaries to identify and locate them. DGLegacy doesn’t ask for confidential information such as your bank account number, the value of your stock options, or financial account numbers!

Designate beneficiaries and trustees

Beneficiaries are the people whom you appoint to be informed about the assets that you assign to them. These are usually your partner, your children or your extended family members, such as siblings and parents.
You might not want to share your asset information with your beneficiaries just yet. No problem. You can choose whether they are to be notified at the time you create the asset or only in the case of an unforeseen event.

If your beneficiaries are, for example, elderly people or children, they might not be proficient with the type of assets assigned to them. In that case, you can assign trustees for each of your assets in the DGLegacy application. If anything happens to you, they can help the beneficiaries to locate their assigned assets and claim ownership.

Configure your Heartbeat protocol

The custom-engineered Heartbeat protocol of DGLegacy verifies that you are OK and detects whether anything unforeseen has happened to you. It is a safe procedure which also aims to eliminate the possibility of false detections of unforeseen events. This is implemented through a multistep process described on the How It Works page.

Heartbeat protocol triggering (unforeseen event detection)

If there is no confirmation in response to any of the reminder emails or phone calls, the system detects that an unforeseen event has happened to you. Then the notifications which you have configured into the system about the cataloged assets and the associated beneficiaries and trustees are triggered.

Unforeseen events happen. With the DGLegacy application, you can protect your loved ones and secure your assets when it matters the most.

Peter Minev
Co-founder of DGLegacy®, the digital legacy planning and inheritance app that protects your assets and secures your family when it matters the most. Author of the book Building TECH. Learn more: https://topstrengthener.com/about-the-book/