What is Asset Protection Planning?
Protecting Your Assets Against Creditors, Divorce, Lawsuits, and Judgements
Asset protection is a financial strategy intended to limit creditors' access to certain valuable assets while operating within the borders of debtor-creditor law.
Asset protection planning involves proactive legal action to protect your personal and business assets from future creditors, divorce, lawsuits, or judgments.
Benefits of Asset Protection Planning
Assets Free of Judgments
Asset protection attorneys leverage legal and lawful techniques that can deter a lawsuit and help prevent the seizure of your assets in the event of a judgment. After establishing a proper plan, a legal opponent or creditor will recognize that you are not an easy target. Little to no assets are within reach of a judgment, putting the debtor in a powerful position. This can deter a lawsuit or, if one occurs, provide substantial leverage in negotiations.
Financial Privacy of Ownership
One of the first benefits of implementing simple legal vehicles to protect assets is the privacy of ownership. You can own real property and other forms of wealth privately, which reduces your "visible" net worth and reduces the risk of frivolous lawsuits or a predatory legal attack.
How to Minimize Asset Liability
You try to do the right thing, follow the rules, and live a respectable life. Unfortunately, accidents and mistakes happen, and our society is increasingly litigious. There are over 19 million new lawsuits in the U.S. every year. Even when accidents occur, there is often a feeling someone must shoulder the blame and responsibility, and that person is often the individual with significant assets.
Like that, you may find yourself on the defensive end of a lawsuit. While many people associate "frivolous lawsuits" with personal injury claims, most forget that legal actions like a divorce or a business-related claim are far more likely to impact their lives and put their assets at risk. And many individuals with significant assets forget that the actions of family members, or those perceived as employees or agents, may also expose them to personal liability.
When the IRS, a creditor, or a plaintiff's attorney wants to find money, they can and will track down every possible connection that leads to you. Your home, your car, and your retirement accounts all might seem mundane, but they have significant value. Unfortunately, many people do not appreciate the value of their assets until someone or an entity threatens to take them away.
Using Legal Tools to Protect Your Assets
At the core of any asset protection plan is a professional and legal examination. We start by taking one's entire financial picture into perspective -- income, debts, assets, risks, insurance, personal or family goals, etc. The legal and financial vehicles used range from insurance policies, state homestead protection laws, business vehicles, and estate planning instruments. More involved cases often include multiple legal jurisdictions in foreign countries where the laws are more favorable to the defendant or debtor.
Counsel from an experienced legal advisor is critical when protecting your assets, as they have the knowledge and ability to create legal structures. We work with you to place your finances, real property, and other assets into legal entities distinct from you. Common legal strategies for protecting assets include:
- Forming a corporation or other distinct legal entity to represent your business. Entities like corporations, limited liability companies, or limited partnerships are legal entities formed to ensure that you and your business are separate under the law. This is especially true for distinguishing between business and personal assets.
- Employing estate planning and unique processes. Basic estate planning techniques can help define ownership of assets and protect both you and your family's future. We can take this process further and utilize tools like dynasty trusts in debtor-friendly states to preserve wealth.
- Dividing and assigning assets appropriately. Your personal assets should be there to assist you and your family. Your business assets are part of your business. Balancing the two assets to reflect your business activity's necessary support for your personal life, and shielding those assets from their respective activities, is not an easy balancing act. We will help you understand your exposure and how to strengthen your legal structures.
Don't Be a Target
It is sad but true that in today's litigious society, several people may want to take hard-earned assets away from you and your children.
This is especially true if you are a public figure, a landlord, a business owner, or work in a profession that is statistically prone to lawsuits, like a physician or attorney.
Besides protecting assets against potential litigation, judgments, and liens, asset planning can also protect you and your loved ones from fraud and financial abuse.