Do you manage your assets responsibly?

Rūta Gadeliauskaitė

It is often mistakenly believed that only very wealthy older people should think about responsible asset management and planning. However, if you have a family – especially if your family is fully or partially dependent on you – or if you own a business, you should also ask yourself whether you manage your assets responsibly.

Responsible asset management means consciously managing your assets and preparing for unforeseen life events in order to protect both your wealth and your family members.

Thinking about unpleasant life events, such as personal business bankruptcy, serious illness, and similar situations – and especially preparing for them – is neither pleasant nor easy. However, only by having a plan for your and your family’s assets can you feel confident that you have done everything in your power to safeguard your own and your family’s well-being.

Legislation lays down rules that apply to different stages of life, such as entering into or dissolving a marriage, loss of legal capacity or death. Nevertheless, each person’s life and family situation is individual, and a person’s wishes and goals, both during their lifetime and after it ends, may differ. It is important to understand and assess whether what is provided for by law coincides with your wishes and objectives, and whether certain additional asset protection measures could help to ensure your and your family’s well-being. For example, if you are engaged in business and seek to protect your spouse and family from financial risks related to that business, it may be worth considering a marital property agreement. Or perhaps your children are already adults, have their own families and do not get along with each other – in that case, it is certainly worth thinking about a will in which you can specify which assets are to be left to each heir.

So what steps should you take in order to be able to answer “yes” to the question of whether you manage your assets responsibly?

Planning for responsible asset management should start with an assessment of your current situation. It is important to draw up a list of your assets and liabilities, assess both your personal property and property held in common (shared or joint ownership), and not forget about companies in which you participate as an owner. In the context of asset management, assets include all of your and your family’s property: real estate, money in bank accounts, securities and other investments, life insurance policies. When thinking about assets, it is essential not to forget liabilities: the real estate used by the family is often acquired with the help of a bank loan. The family or one of the spouses may also have other financial obligations. It is important to remember that, in the event of death, heirs inherit not only assets but also liabilities.

Reflect on the situations you want to prepare for – these may be serious illness, premature death, divorce or business bankruptcy. Assess what the consequences of each of these unforeseen events would be if you did not prepare and did nothing. Consider whether such outcomes would be acceptable to you and your family, or whether your wishes and intentions are in fact different.

If you run a family business, the list of things you need to think about and prepare for becomes even longer. Discuss openly within the family and decide whether you will aim to keep the family business and its management within the family, whether it would be wiser to entrust management to professionals while keeping ownership in the family, or whether, in the long term, the most appropriate and acceptable solution would be to sell the business altogether. Depending on your vision for the transfer of the family business, different solutions can be chosen for its implementation and safeguarding.

Finally, draw up a responsible asset management plan and, with the help of professionals if needed, ensure that it is implemented.

Lastly, it is worth noting that a responsible asset management plan and the measures implementing it should not be left “to fate”. It is important to review the plan periodically and update it when necessary. It is particularly important to review the plan when your family situation changes – when you marry or divorce, have children, acquire additional assets, your financial situation changes significantly, or you inherit financially significant property. Changes in legislation and the tax environment can also affect the plan and the measures used to implement it.