Asset protection is a planning task to deter lawsuits and prevent increased settlements. It is crucial to make a protection strategy before any litigation arises. Asset protection helps you shield your assets from lawsuits and creditors, so, if a party wins a judgment against you, you can continue your business with little disruption.
Asset protection is like buying insurance: you cannot wait until you have an accident to purchase it. Asset protection must comply with the Uniform Fraudulent Transfer Act. A fraudulent transfer is a transfer intended to deceive creditors. If the court decides that a transaction is fraudulent, it allows the creditor to seize the assets no matter the structure in which they are currently held in order to satisfy the judgment.
Asset protection is indispensable for everyone who has assets. There are millions of lawsuits filed every year in the U.S. Consequently, I believe that if you are a wealthy person, you have a 100% chance of being sued, harassed, or endangered because of your assets. Following are some basic methods which can protect your wealth.
Transfer the title of your home
Your home is one of the most important assets to be protected against creditors and lawsuits. It is wise to transfer the title of your home. Transferring your home into the name of a living trust will not grant protection; however, irrevocable or grantor trusts can offer substantial asset protection.
Defend retirement assets
Defending your retirement assets is also extremely important. Many people think that retirement assets are automatically protected from creditors; however, only qualified pension plans such as 401(K) are protected by law. If you have substantial amounts in an IRA you should consider transferring them to an ERISA (Employment Retirement Income Security Act) plan in order to enjoy stronger asset protection benefits.
Remove equity from your property
Equity stripping is another basic method to protect your assets. You can remove equity from your property by activating a loan against it. You need to spend that cash or protect it with an effective asset protection vehicle such as a trust. These basic methods help provide a higher level of protection and peace of mind.
Know what asset protection is all about
Asset protection safeguards an individual’s financial and physical property against lawsuits, divorces, and judgments. You can provide protection for yourself and for your heirs through advanced planning. Begin by preparing a complete list of everything you have and each item’s value. You may have created this list in determining your net worth or in creating a basic plan for your estate. You can review the property list with the help of an experienced professional, who can assess the exemption status of all the items. An exempt asset is one which cannot be assigned for court action. Creditors cannot place liens on any property that is exempt. Your adviser will help you with procedures of protection, such as family-limited trusts and irrevocable trusts for those items which are not exempt.
Organizing asset ownership in the worldwide economy
The global economy has been facing major changes such as increased security concerns, the growth of private wealth, and tax issues. Even so, individuals and corporations are still transferring assets to other countries, because transferring assets involves better returns. If an individual or company wants to increase the return on investments, reduce risk, and safeguard assets, it is crucial to choose the right jurisdiction. Asset protection professionals can help individuals and companies steer through the complexities of finding the best offshore options.
There are several types of legal entities in which asset ownership can be structured. Trusts, Corporations, Limited Liability Companies, Limited Partnerships, and Limited Liability Partnerships are the most common types of these legal entities. Many industrialized countries, islands and republics offer special advantages to investors. Each jurisdiction has its own laws and regulations and offers different entity advantages and disadvantages. Foreign companies and individuals looking for investment opportunities in the U.S. can choose from any of the 50 States, Puerto Rico, and other territories. Some of the U.S. jurisdictions are more favorable to investors and some states have asset protection laws. These jurisdictions are discussed in Chapter Nine, of my book Asset Protection: What If?
The shifting investment landscape has led to the rapid growth of a new type of business: professional entity management. These businesses assist individuals and companies with finding the right jurisdictions and entities for their investments. They also help handle paperwork, fees, and other important tasks involved in forming and maintaining entity structures. These companies have a large network of relationships and any individual or company seeking the help of these companies should focus on two important points: experience and network. The more experience a company has, the more likely it is that they will be a one-stop solution.