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Protecting Assets From Creditors Lawyers
What Is Asset Protection Planning?
Asset protection planning involves applying a lawful series of techniques to protect your assets from claims of future creditors. These techniques are designed to deter potential creditors from going after you by making it difficult or impossible for them to grab hold of your assets or collect judgments against you.
How Does Asset Protection Planning Work?
In cases where significant sums are involved, asset protection planning often includes setting up a series of trusts, partnerships and/or off-shore entities to hold legal title to your assets. A future creditor who recognizes how difficult it would be to collect on any judgment it may win might decide it makes little sense to pursue a claim or might be willing to settle for pennies on the dollar.
What Are Some Simple Asset Protection Planning Techniques?
Many of the traditional forms of estate planning can be used effectively as asset protection techniques. These include:
- Insurance: The most common asset protection technique. By transferring the risk to an insurance company, you can usually protect your assets
- Gifts of property: These remove the assets from your estate and lessen the risk of attack by creditors. For example, if you give your farm to your child, it is no longer at risk from your creditors (though his creditors and spouse may pose a risk)
- Retirement plans
- Conducting business as a corporation, using limited liability companies, limited partnerships, and other business entities: This affords personal liability protection as well as possible tax advantages
How Do I Know If I Need To Employ Additional Asset Protection Techniques?
The best option is to meet with an experienced lawyer and perform an asset risk analysis to assess both the likelihood and extent of your exposure to risk of attack by creditors. Together you and your lawyer (perhaps with input from other professionals, like an accountant) will then evaluate the various risks and exposures you face, and figure out how far you are willing to go to protect your assets from attack. Essential factors to consider when you are your lawyer develop a strategy for asset protection include:
- Your occupation
- The nature and extent of your assets
- Your family situation
- Your own personal wishes and desires for your assets
Do I Need An Attorney To Assist With Asset Protection Planning?
There is a very sharp dividing line between "legal" asset protection planning on the one hand, and actions to defraud creditors (which are criminal) on the other. For that reason it is essential to have an attorney guide you through the process. Additionally, a lawyer experienced with estate planning and asset protection can help you identify your risk factors and assess what kind of asset protection you need.
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