Just so you know, I’m a big fan of life insurance, both permanent (“perm”) and temporary (“term”) policies. On the other hand, it is also important to pick the right policy for the report; sometimes a perm policy with lots of bells and whistles is the perfect solution but in others, buying a simple, inexpensive term policy is the way to go. In the end, it’s about figuring out what policy fits your needs and budget, rather than your advisor’s. Just don’t automatically assume that your insurance agent is on the take if she sings the praises of universal life or he extolls the merits of a participating whole life policy.
Although most marriages commence with a ceremony where both partners solemnly vow, “until death do we part,” life sometimes has other ideas. As a lawyer, financial planner and divorce survivor, I know far more about the law in British Columbia on how assets are divided when love is replaced by other far less pleasant emotions . . . or at least I did until the rules changed a few months ago.
Fortunately, I’ve been able to bone up a bit since then, although no one really knows what some of the new rules really mean until they have been given a good test drive by the courts. With this giant caveat firmly established, here is a hopefully brief summary of some of the new rules that apply to financial matters and how they will affect spouses and common law partners who are no longer quite so fond of the sight of each other.
In my last article, I (hopefully) explained how incorporating may not provide the liability protection people expect. In this one, I will explore some of the steps we can take to keep family assets safe, most of which don’t involve forming a company.
(a) Planning Ahead
The key factor in any of the steps mentioned in this article is when you take action; if you only start planning to secure your assets after the wolves are already sniffing at your door, then it is likely too late. Our legal system has some scary sounding terms like “fraudulent conveyance” and “fraudulent preference.” These terms apply to transactions like gifting or transferring assets to a family member for less than market value or paying out certain creditors and stiffing others. If a court determines that you have taken steps to thwart those aforementioned creditors after you are already insolvent or have creditors coming after you, then it can set aside the transactions.
Other than popping ‘the question’ to that special man or woman in your life, deciding whether or not to incorporate your business may be one of the most important decisions you ever face. Although I suggest that you get professional advice based on your personal circumstances, here are some of the things to consider before taking the plunge. Rather than trying to ram this down your throat in a single article, I’ll nibble away on this topic a little at a time over the coming weeks. Today’s morsel shall be on companies and liability protection.
Incorporating and Limited Liability
A company is treated as a separate person for most legal purposes. As a result, if the company runs into legal problems and has been clearly representing itself as a company so that everyone is forewarned, the business owners may be able to protect their personal assets from being exposed to the company’s creditors. Accordingly, even though your business might become a thing of the past, you may still be able to hang on to your home and other personal assets.