Asset protection planning is very important for businesses. As with anything that involves taking a risk, it is essential that you keep your assets protected. Much like in a gambling situation, businesses will want to take their assets off of the table when the times are good so that they can avoid losing them when times get tough. Businesses that are more likely to get sued should definitely focus on ways to protect their assets. This is especially true of physicians and other professional industries. Sometimes, even your average business may get tangled up in a sticky situation.
Creditors take their time focusing on ways to collect the money that they are owed, while debtors want to find ways to protect their assets from creditors. It is really all a matter of creditor/debtor law. The key is to protect your assets without doing something that is illegal or dishonest. Here are a few tips that will help you with your asset protection planning.
Plan Ahead of Time (Before Issues Arise)
There are a lot of things that you can do before any type of claim arises. When claims arise it is more difficult to do anything to protect your assets. If you try to do these things after you are hit with a claim, then you can usually fall under the fraudulent transfer law.
Planning Too Late Can Backfire On You
If you plan to protect your assets after you face a claim, then you might find yourself in an even bigger bind. Some people even consider it much like getting a preventative flu shot after you are diagnosed with the flu. It doesn’t do much good, and it can actually make you even sicker. The debtor can actually be held responsible for the attorney fees associated with the case, which makes their debt even greater.
Don’t Skip Out On Insurance just Because You Have an Asset Protection Plan
Liability insurance and professional insurance is essential for business owners. The asset protection plan should just help to supplement the insurance, instead of replace it. Asset protection plans don’t help to protect against lawsuits, and there are still legal fees associated with them. These insurance policies can help to offset these costs.
Know the Difference Between Personal and Business Assets
Businesses are responsible for protecting business assets, and individuals are responsible for protecting personal assets. When personal assets are placed in the hands of businesses in order to receive protection, it can really make things complicated. The best way to protect personal assets is through the use of a trust. Properly drafted trusts can be effective at protecting personal assets.
Don’t Give Up Too Much Control
When you are trying to protect your assets, it is important that your client has enough control over your assets, but you don’t want them to have too much control either. Giving too much control can give your creditors an opportunity to overturn your asset protection plan.
Asset Protection Planning Isn’t the Same as Estate Planning
Sometimes, your asset protection planning and your estate planning can work well together, but sometimes it may not be the best idea. During estate planning, it is all about creating a plan for your heirs. Don’t set aside your assets as “gifts” to prevent them from being seized. This is almost always something that ends in failure.
Holding Money Overseas isn’t Always a Good Idea
Many people hold money in offshore accounts so that it cannot be seized, but this is not always the best idea. In fact, a lot of recent cases have shown that the courts have the power to demand the money be brought back in the country. This is known as a repatriation order. If the debtors don’t comply with the courts, they can end up being held in contempt of court. This can result in jail time, fines and other expenses.
Bankruptcy Should be a Last Resort
Bankruptcy used to be something that people turned to quite frequently. The truth is that the laws have changed over the years, and it is not what it used to be. Bankruptcy is not a great way to protect your assets, and in many cases your asset protection plan may not even hold up in the case of a bankruptcy. With this in mind, many businesses are not turning to bankruptcy much these days.
Be Able to Explain Your Plans or It Won’t Work
Asset protection plans can often times be very complicated. If you cannot explain the plan if you are asked to, then it will likely fall through. You may be asked questions about your plans in the event of a claim being filed against you. If this happens, you will need to be able to explain your plan completely, without any hesitation. If you can’t, it can raise suspicions. Then, chances are it will not work for you.
Things that Aren’t Disclosed Will Usually Always Come to Light
Planning for asset protection plan should not be done under the assumption that things can be left in the dark. In most cases, the plans that are done in secret will come to the light and this can cause a lot of trouble. Chances are if you don’t disclose everything, it will not end well for you. This is especially true in cases of bankruptcy.