If you’re like most people, when you hear “asset protection” you think it applies only to the ultra-wealthy. The reality is that anyone can be sued and lose all of his or her assets. Every year good people are financially wiped out by a car accident, job loss, medical crisis, business failure, an injured tenant, or some other issue that resulted in a huge monetary judgment.
Common Asset Protection
You have probably already engaged in some form of common asset protection planning. One of the most common is the purchase of some form of liability insurance — homeowner’s, renter’s, automobile, business, professional, malpractice, long-term care, and umbrella policies. Insurance is your first line of defense against liability. However, many times, insurance fails because the coverage limits are inadequate or the policy has a laundry-list of exclusions that ultimately exclude coverage for the claim against you.
Another common form of asset protection is the use of business entities such as corporations, limited partnerships and limited liability companies, to separate a person’s business assets and liabilities from their personal assets and liabilities. While a corporation may shelter personal assets from a lawsuit filed against the corporation, the opposite is not true – if you, as the shareholder of a corporation, are personally sued, your shares of stock in the corporation are not protected from a judgment entered against you.
Advanced Asset Protection Planning
Asset protection planning is the process of taking property currently vulnerable to seizure by creditors, predators, and lawsuits and positioning it in a way to discourage lawsuits, provide a valuable bargaining chip if a lawsuit arises, and minimize loss. Note that advanced asset protection planning will generally require giving up some or all control and, perhaps, ownership of the property.
The goals of asset protection planning are to provide an incentive for settling a claim, improve your bargaining position, offer options when a claim is asserted, and, ultimately, deter litigation. Asset protection planning is NOT about avoiding taxes, keeping secrets, hiding assets, or defrauding creditors.
To protect your assets, you must plan ahead. Asset protection planning cannot be done as a quick fix for your existing legal problems. Your plan must be in place before a lawsuit arises. And, in some situations, a significant period of time must pass before the asset protection plan is effective.
If you are a landlord, real estate investor, business owner, work in a high-risk profession, or have accumulated or inherited a significant amount of unprotected property, contact us today to schedule an asset protection review.