What Is Asset Protection? Is It Legal Or The Same As Hiding Assets?
In this article, you will discover:
- The truth about asset protection and myths of asset protection
- Who needs asset protection
- If asset protection discourages lawsuits
- The best time to begin asset protection
- If certain types of businesses protect your assets
Asset Protection Planning is a proactive process that anticipates and prepares for catastrophic lawsuits and protects your property from the consequences of judgments that may result from these lawsuits. It is NOT about trying to avoid your legitimate debts or shirking your responsibility when your actions cause harm to someone or their property. It is a means of protecting yourself from a devastating loss of your hard-earned assets if you are sued and ordered to pay a judgment which is so excessive that it exceeds the maximum coverage of your liability insurance. The essence of asset protection planning is to discourage lawsuits and make it harder to collect from you
There are, however, many Asset Protection Planning Myths. They are:
- It is illegal or unethical.
- When it is done correctly, it is 100% legal and ethical.
- It is about hiding assets and trying to dupe creditors/claimants.
- It is only about making it more difficult for creditors and reducing the unfair advantage they have over you.
- It is using existing law to place barriers in front of creditors to discourage them from coming after your personal assets.
- Only rich people need it.
- Anyone with assets that they do not want to lose needs some kind of plan.
- Asset protection planning is just as important for someone with relatively modest means as it is for the wealthy.
- This is because proportionally a judicial judgment will take a bigger bite out of a modest estate as compared to a large estate. For example: The Smiths have an estate worth $350,000. The Jones have an estate that is worth $2.5 million, not including their home and retirement accounts. Each family is sued, loses, and has a judgment entered against them for $500,000. The judgment against the Smiths is for more than they are worth so even after paying everything they can, they still owe the judgment creditor money. The judgment against the Jones represents only 20% of the total value of their estate. So, after paying the judgment, most of their estate is still intact.
- I can create a plan after being sued.
- You must plan before you get sued.
- If you wait until you have been sued, you can have your plan undone as a fraudulent transfer.
- This is not an area in which to procrastinate.
- I will lose control of my assets if I put a plan in place.
- A well-designed plan let you maintain control of your assets
- I have never been sued and will not be sued because I keep a low profile.
- Asset protection planning cannot prevent lawsuits.
- In our litigious society, you can be sued for anything.
- Asset protection planning is about placing barriers in front of your assets to discourage people from suing you in the first place.
- It will help me lower my federal income taxes.
- This is total misinformation.
- I have a revocable living trust and it protects me.
- It provides no asset protection from creditors.
Who Needs Asset Protection Planning?
You need asset protection planning if you own significant assets that you want to protect:
- A business
- Real Estate
- Mutual Funds
- Oil & Gas Interests
- Fine Art
Asset Protection planning is especially important if you:
- Own risky assets, e.g., rental property
- Are a business owner
- Are in a high-risk profession, e.g., doctor, dentist, lawyer, CPA, engineer
Does Asset Protection Work?
Yes, asset protection definitely works.
Can Asset Protection Discourage Lawsuits? Does It Work?
Yes, discouraging lawsuits is the essence of asset protection planning.
When Is The Best Time To Begin Asset Protection Planning? Is It Ever Too Early Or Too Late?
You must start asset protection planning before you get sued. If you wait until you have been sued, you can have your plan undone as a fraudulent transfer. This is not an area in which to procrastinate.
Is Asset Protection Planning Expensive?
Asset Protection Planning is not nearly as expensive as getting sued and losing all of your assets.
How Do I Select An Asset Protection Attorney In Texas?
You need someone who is well-versed in asset protection planning in Texas.
I Have Insurance. Do I Still Need Asset Protection?
You can have a judgment awarded against you in excess of the insurance you have. In that case, you need to be prepared with a plan to protect your assets.
I Have Trusts In Place. Won’t That Protect My Assets?
A revocable living trust provides no protection from creditors.
Can Certain Types Of Businesses Protect My Assets, Like A Corporation Or Creating An LLC?
Yes they can, and LLCs are one of the best ways to protect your personal assets from high risk business activities.
Should I Just Gift My Assets To Family Or Friends? Will That Protect My Assets From Lawsuits?
If you gift your assets to your family or friends, you no longer have any assets at risk. This, however, can create serious tax consequences for your family and friends if you gift your property to them.
For more information on Asset Protection Planning In The State Of Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (254) 233-7779 today.