Asset protection encompasses plenty of technical areas, such as tax, bankruptcy, trusts, international, and criminal law that requires proper planning. Asset protection planning basically involves employing a series of legal strategies in order to safeguard your assets against potential lawsuits, creditors, claims, and predators.
Generally speaking, strategies are specifically developed to deter future creditors from going after your assets by making it impossible or significantly difficult for them to obtain your assets or collect any judgment against you.
Basic Strategies Used in Asset Protection Planning
In general, many estate planning strategies could be used for asset protection, including the following:
- Insurance – Cantley Dietrich and other top asset protection attorneys in Georgia noted that this is the most common and widely used strategy for asset protection. When you transfer risk to your insurance provider, you’re essentially protecting certain assets.
- Operating your business as a corporation, utilizing limited partnerships, limited liability companies (LLCs), as well as other kinds of business entities – This strategy would give your personal liability protection and potential tax benefits.
- Gifting Property – Gifting property, let’s say a second home, to your son or daughter would effectively safeguard that property from your creditors.
- Retirement Plans – Putting assets in an ERISA-qualified retirement plan could offer some protection against potential creditors.
In instances where a substantial amount of assets are involved, planning would usually involve establishing a series of partnerships, trusts, and/or offshore entities used for holding your assets’ legal title. Once a creditor recognizes the difficulty in collecting a judgment against you, it might back off or agree to a settlement.
Determining If You Need Extra Asset Protection Strategies
To figure out whether or not it’s worth your time to employ stronger asset protection techniques, it’s best to discuss your specific circumstances with an experienced asset protection attorney. Your attorney, probably with help from an accountant, would conduct an asset risk evaluation to analyze the various exposures and risks you might face and then establish a plan to safeguard your assets.
When you’re developing an asset protection plan with your attorney, you would need to consider the extent and exact nature of the assets you own and need to protect, your occupation, what you wish to happen to your assets, and your family’s situation.
What Asset Protection Planning Can’t and Shouldn’t Do
As vital as it is to understand what asset protection could do, it’s equally vital to know what it can’t and shouldn’t do. For one, it shouldn’t help people in evading or unlawfully reducing taxes. It likewise shouldn’t be used to hide assets, but instead lawfully safeguard those assets. In addition, you cannot and shouldn’t use asset protection to defraud creditors.
There’s a thin line between defrauding creditors, which is a criminal act that’s punishable by criminal penalties, and protecting assets the legal way. It is for this reason that you need to work with an experienced attorney when trying to come up with an asset protection plan. Your attorney could aid in identifying your risk factors and analyzing exactly what type of strategies would be perfect for your situation.