Asset Protection and Mutual Funds
When most of us talk about asset protection, we usually think of protecting assets from the claims of creditors. But what about protecting assets from failure of the institution in which the assets are placed?
For example, what happens if a mutual fund fails? The answer is two-fold. First, no mutual fund company has failed. Second, even if a mutual fund family were to go bankrupt, the money in the funds would be safe. That is to say, an IRA, a 401(k) or any other account would be safe.
As Walter Updegrave points out in his piece in the February issue of Money magazine, unlike when you buy a CD at a bank, the money you invest in a mutual fund remains separate from the assets of the parent firm. It goes to the particular mutual fund you buy. Each mutual fund is a separate entity. The fund company doesn’t own the funds under the firm’s name. It only has an agreement to manage the assets and sell the shares. If the parent company went bankrupt, the assets of the individual funds would not be available to the firm’s creditors. In addition, federal law requires funds to have insurance that covers embezzlement, fraud and other similar matters.
For answers to other questions you might have about asset protection, contact the law firm of Wilson and Wilson.
