Asset Protection

What is Asset Protection?

Asset protection planning is a process by which you organize your assets–personal, business and/or professional–and employ legal tools to guard against risk of future creditors. Asset protection techniques are designed to deter potential creditors from going after you, and discourage them if they do, generally by making it difficult or impossible for them to take hold of your assets or collect judgments against you.

There is a very sharp dividing line between “legal” asset protection planning and criminal actions to defraud legitimate creditors. For that reason it is essential to have an attorney guide you through the process.

It is also a good idea to integrate asset protection into your estate and tax planning; and, like a portfolio, asset protection should be diversified. Don’t rely on one method.

So who are these creditors? Some of the most common are nursing homes and other long term care providers, lawsuits from people injured in a car accident with you, and lawsuits from people injured on your property.

In light of the potential creditors, asset protection is increasingly used by the middle class. Also professionals (doctors, lawyers, accountants, etc.), as well as business and property owners all face increased risk from out-of-control jury awards and zealous regulators.

If you are sued, your insurance should cover some of your losses. Asset-protection planning isn’t a replacement for insurance, but it is a backstop–a way to shield some of your wealth should you be hit with a big judgment that isn’t fully covered. And the time to tuck assets behind shields is when you are not being sued. Wait until a creditor comes knocking and there is a greater risk that a transfer will be invalidated as fraudulent.

Most people should try to protect their assets to the best of their ability, but there are some people who need more asset protection than others.