What is Asset Protection?
Different methods used to protect someone’s assets from creditors in the event of a divorce, lawsuit, bankruptcy, or other debt-incurring events. These methods include:
- Insurance – policies can provide coverage for damage
- Business entities – corporations, LLCs can help protect business assets
- Transferring property titles – someone else legally owns the property
- Retirement plans – these are generally protected from creditors
- Asset protection trusts – assets are owned by a trust instead of an individual
- Offshore bank accounts – creditors may not be able to access bank accounts in other countries
How do asset protection and financial planning work together?
Asset protection is a part of financial planning. By taking measures to protect your assets, you also give yourself more financial security. For example, if you own a business, your finances need to be in order so that your business can run smoothly. By factoring in asset protection for your business, you’re able to protect relevant assets, such as the building you operate out of and any equipment needed to provide services. This way, even if you are held liable as a business or property owner, your assets can’t be targeted during a lawsuit.
Asset protection is also relevant to your long-term goals, such as retirement and whether you want to leave things behind for your loved ones. It allows you to secure your existing and future assets to pass on to the next generation.
Benefits of Asset Protection Planning
- You’ll be prepared to avoid future creditors
- You can negotiate with creditors if needed
- Late planning is unlikely to protect you – if you try to transfer your assets when you’re already being sued, the court will view this as fraudulent
- You can create an estate plan – being familiar with your assets better allows you to incorporate them into your plans for the future
- You’ll have peace of mind
Role of Attorney in Asset Protection
An attorney who specializes in asset protection:
- Can help you understand the legal side
- Can help you customize your plan
- Can provide guidance if you get into a situation that threatens your assets
- Can help you create an estate plan in the process – being familiar with your assets is beneficial to creating a comprehensive estate plan