Asset Protection - Everything You Need To Know

Asset protection is the process of lawfully preparing your assets for defense against judicial claims. In other words, the protection of one's assets is quite literally shielding them from attacks by creditors, who might in the future seek to take what you have in order to repay any debts you may incur. This is in the case for anything from land to vehicles to businesses to homes above a certain value. Your bank account might even be at risk, whether you know it or not.

The process itself can be as simple or as complex as you like, and it really depends upon how much you have to be protected what methods you use: insurance or investments, gifts or retirement plans, and more.

Q: So when and why should you protect your assets?

A: Depending upon what kind of career you have led and, indeed, what kind of assets you have, you might be more or less at risk of claims against your estate. For instance, if yours is a very high-risk career, such as neurosurgery or pyrotechnics, you need insurance -- and that insurance is quite expensive. This is an example of asset protection, but it doesn't cover all of your bases. If you don't have such a cushion to fall on, you may very well be in trouble if someone decides to take legal action against you, whether you're being sued or not.

If you're well-off -- or indeed, even if you have made some good investment decisions in the past -- you need to have your assets protected, especially if you want to keep what you own. There are many ways that you can do this, as we will discuss in some detail.

Q: How does it work?

A: The concept of defending one's estate is not at all difficult to understand, even if some of the most complex methods of protection are employed. The premise behind asset protection is to shift the focus of creditors away from your estate -- or indeed to make it so difficult for a creditor to pursue a judgment as to deter those that might sue you. Whichever track you take, you must keep in mind that there are legal ways and there are illegal ways to protect your fortune. If you decide that your estate needs protection against judicial interests -- or if you feel that you want to reduce the risk of losing your fortune if you have a bad run-in with creditors -- you should consider a few different methods.

Q: What are some simple ways?

A: There are several simple ways that you can protect your assets. The first is insurance. With an insurance policy, you essentially transfer the risk to your estate unto the company issuing your policy. This is more often than not enough for those with smaller estates or low-risk careers. However, it may not be enough if you are well-off (or even comfortably situated), and you might want to consider a few other options.

- Investments
Investments can come in a variety of forms. This may include the stock market, real estate property, or business property, as well as foreign coins and currency. If you're looking at personal or real estate property as a protection method, you need to read up on your state laws. Some states are more liberal than others. For instance, in one location, you may be allotted a certain number of acres (in some cases, more than two hundred), and in others, you may only be allowed a certain dollar value within municipal or country areas. The stock market can be a pretty shifty way to go, as it is always fluctuating - however, some wise investments can make a difference. The great thing about coinage in general is that it never depreciates, even when it is obsolete -- it always has some kind of intrinsic value somewhere.

- Gifts
Another method of asset protection is the gift. If you give something of yours away, it no longer exists on your financial record -- hence, your creditors can no longer go after it. However, you may be subject to gift taxes, so beware.

- Property transfer
Along the lines of a gift, a property transfer can be useful. However, if you change your name on property titles or change it into a 'secretive limited partnership,' then the tax man might come after you, even if your creditors can't find you. A double-edged sword indeed.

Q: What are some more complex ways?

A: Sometimes, you need more complex ways of protecting your assets than the ones listed above. At times, creditors can get crafty, so you need to outsmart their systems. We're here to help.

- Trusts
A living trust to a loved one or to several loved ones can be a great defense. This gives you complete control over your estate until such time as you no longer have need of it or until you die. You don't need to worry about creditors or probate, either. Your loved ones' creditors, however, are another story.

- Wills
Your will is very much like a trust, only it is reserved only for after your death instead of after a certain date. This is a legal document that must be signed and witnessed. It, too, bears the downside of trusts in that you cannot necessarily deter your beneficiaries' creditors.

- Partnerships
With a partnership, you lose a modicum of control regarding your finances, and yet you are not completely liable for your assets. Many people find it more appealing to give up a little bit of freedom regarding their money in trade for the safety of a limited partnership.

- Offshore transfer
The new fad nowadays is transferring money to overseas investments or accounts. This, too, can bear ill effects, as you need to be careful of fraudulent activities and institutions ready to take your money, criminalize you, and set you on a path to imprisonment.

Q: What asset protection methods should I avoid at all costs?
- Defrauding creditors and the IRS
- Fraudulent overseas entities

 






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