It can take a long time to acquire your most important assets, but only a short amount of time to lose them if you’re not properly prepared for potential challenges. As a VP of Finance for Overdraft Control in San Francisco, Dr. William Sassman says that taking some basic steps ahead of time is key to protect your personal and business assets from a claim or a lawsuit.

There are already tried and true methods of protecting your most important belongings from third parties – the key is to know about them and follow the process, says Dr. William Sassman.

Shielding Assets Through Your Business

In the case of  business assets, one of the first things you can do is move your business entity from a sole proprietorship – which leaves you wide open to personal claims –  to a corporation. However, having LLC in your business title isn’t always enough, he says. The key is to physically separate your business dealings from your own by having a separate account, as well as using the corporate name on all communications and records. Make sure you keep a record of what is discussed at annual meetings in the form of minutes.

Having a proper paper trail can also prevent creditors from making claims against your assets. Having legitimate contracts for all of your business dealings and proper lease agreements is important – a word of mouth agreement or an email may not provide the safety you’re looking for. It also means only working with people above board, without paying people under the table for projects. In other words, transparency is your friend when it comes to hanging on to assets. Registering your key assets in your company name can also go a long way in terms of protection.

Personal Asset Considerations

When it comes to the most important personal asset – your home – you can turn to the homestead exemption that can shield some of the value of the property in the case of a bankruptcy or even a death. Depending on the state you live in, you may have this protection automatically, although it doesn’t shield you from a bank foreclosure if you fail to make payments. In other states, you have to apply for it.

Another strategy when it comes to protecting assets such as a home is to put them in your spouse’s name. That will prevent a creditor from coming after your property in the case of liability. However, if you’re using this strategy, you should take into consideration how assets will be divided in the case of a divorce, warns Dr. William Sassman.

Another consideration is an asset protection trust, which varies in allowances based on your state of residence. Through an asset protection trust, you’re transferring ownership of certain assets into a trust that can’t be accessed by a creditor.

Don’t Skimp On Insurance

Cutting corners on business insurance might save you a few dollars up front, but you’ll come to regret the decision if a third party is challenging you, warns Dr. William Sassman.

Insurance should be one of the first considerations of your initial budget. It can absorb a claim against you rather than having a claimant coming after your belongings in lieu of insurance. However, you need to ask a lot of questions when buying insurance to ensure you’re properly covered, depending on the type of business operation you’re running. Look for policies that provide $1 million to $2 million.

Consider umbrella insurance that can protect you from a personal or business standpoint, but keep in mind there are conditions – such as whether you’re running a legitimate operation. That’s another reason why it pays to keep proper records and work with reputable contractors. However, assuming everything is legal, umbrella coverage can help to cover millions of dollars for only a few hundred dollars a year in fees.

Putting Up Multiple Roadblocks To Creditors

Following a number of these strategies doesn’t mean you won’t end up on the wrong end of a lawsuit but having protections in place may deter a creditor from coming after your assets and take a settlement deal as an alternative.

Regardless of the risk level of your business, thinking about how to best protect your assets ahead of time can save you a lot of financial pain down the road, advises Dr. William Sassman.