Asset protection encompasses the strategies used to safeguard wealth. It’s an element of sound financial planning that protects assets from creditors. The solution is utilized by individuals and business entities specifically to limit creditor access to certain assets. This is done while operating within the bounds of laws applying to the debtor-creditor relationship.
The Principles of Asset Protection
Asset protection is a legal means for insulating assets without hiding assets (concealment) or engaging in other illegal practices. These include fraudulent transfer, contempt, bankruptcy fraud, or tax evasion.
Financial experts assert asset protection start before liability or claim occurs. There are common methods of asset protection, including accounts-receivable financing, asset protection trusts, and family limited partnerships.
When Asset Protection is Needed
Asset protection isn’t always the answer. Some might advise a debtor to file for bankruptcy. This is advisable if your assets are few and not necessarily valuable. Significant asset owners need to be aggressive when it comes to asset protection.
There are assets that are exempt from creditors under ERISA and U.S. federal bankruptcy proceedings. This includes retirement plans. Some states also exempt home equity assets if these assets are for a primary residence. Each state also has its own laws regarding assets protected from entity liabilities. Those who do fall under this umbrella include limited partnerships, owners of corporations, and limited liability corporations.
Real Estate and Asset Protection
Real estate can function as a form of asset protection. Property jointly held by tenants or shared by married couples fall into the category. The debt of one property owner cannot be inflicted on the other owners. Hence, creditors are hindered in use of liens or other claims in their efforts to collect a debt from a single person engaged in joint property.
When it comes to asset protection, ProAdvocate Group has a mission to educate and support making the law work for you. Our experiences result from a total of over four decades of intense research and unprecedented success in specialized, complex, and basic legal principles like asset protection.