Protecting Your Assets

Gerald A. Townsend |

With the world still in the grip of COVID-19, global economies reeling from lockdowns, closures and distancing, and a polarized political environment, many are concerned about protecting their assets. For those saving for retirement or living off their retirement assets the focus is often on fluctuations in portfolio values.

All investments bear some form of risk, and in trying to escape one danger you often walk right into another peril. Bank savings and money-market funds are relatively safe from loss of principal, but their low rates provide little opportunity for the growth required to fund retirement needs. Owning just a few stocks entails excessive risk but can be addressed through appropriate diversification.

This year we have experienced dramatic ups and downs in markets and the upcoming elections heightens the anxiety for some. We caution investors not to make dramatic portfolio shifts based solely on the expected outcome of an election. A multiplicity of factors drives markets and history suggests that staying invested through periods of uncertainty is a better strategy.

However, asset protection extends far beyond just investments.

Some risks can be addressed through insurance. Life insurance protects against the risk of a premature death. Homeowner’s and auto insurance cover the risks associated with those assets. Long-term-care insurance safeguards against the high costs of care in a home or facility. Liability insurance can shield against some personal or business legal claims.

If you are engaged in a business activity examine whether a legal structure such as a limited liability company or a corporation might provide a sufficient defense against future legal risks.

Assets are also at risk from income and estate taxes. Each year it is important to estimate what your taxable income will be and plan accordingly to take advantage of the tax bracket you are in through different strategies. Tax changes introduced in 2017 are set to expire after 2025 and future tax rates could be higher than current rates. More than ever, multi-year tax planning is critical and variables such as taxable investment sales, Social Security benefits and retirement plan withdrawals need to be considered in your planning.

Family assets are also at risk when they pass to the next generation. It is essential that account titles, beneficiary designations and estate documents are up-to-date and inline with your wishes. Trusts can be an effective tool for protecting assets when the beneficiaries of those assets are minors, are adults but are not capable of managing their finances or have exposure to potential legal risks.

Finally, assets are at risk from miscreants engaging in fraudulent behavior, identity theft or similar crimes. Constant vigilance is the best protection.

Developing, structuring, and implementing asset protection strategies may be as simple as buying an insurance policy or as complex as creating business legal structures or trusts. It requires a thorough analysis of your risks and their potential severity.

Gerald A. Townsend, CPA/PFS/ABV, CFP®, CFA®, CMT is president of Townsend Asset Management Corp., a registered investment advisory firm located in Raleigh, North Carolina. Email:

Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Forward looking statements cannot be guaranteed. Past performance is not indicative of future results. This material is not financial advice or a recommendation to buy or sell a particular security or product. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Townsend Asset Management Corp. is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm and its employees can be found in its Form ADV Part 2, which is available upon request. TAM-20-62