Assets include anything of value that one owns:
- Personal property
- Real property
- Bank accounts
- Capital assets
Assets come in two varieties for purposes of creditor access and bankruptcy: exempt and nonexempt. Creditors cannot get a hold of exempt property, which is essentially any form of property that is needed to survive.
What Assets Are Exempt?
Exempt assets include:
- Less than a certain minimum income (such as $250/wk)
- Social security and welfare benefits
- Unemployment and worker’s compensation
- Veteran’s benefits
- Retirement pensions and accounts
- Child support
- Life insurance policies
- Personal injury awards
- A percentage of home equity
- Necessary items such as an inexpensive car, some jewelry, appliances, furniture, work tools, clothing, etc.
Statutory designations vary from state to state.
What Assets Are Non-Exempt?
Everything else, such as:
- A second car or home
- Anything else unnecessary and expensive
These things need to be protected from creditors, before creditors file a lawsuit. If a debtor gives these items away after a complaint has been filed, it will constitute fraud.
How Can I Protect My Assets?
The simplest way a person can protect assets is by giving them to family members. Of course, after the transfer, the assets will no longer belong to him or her. Also, a family member may be equally likely to have creditors.
Another plan is to put as much money as possible into retirement accounts such as pensions, profit sharing, IRAs, and 401(k) plans. One should make sure these accounts are exempt under their state law.
One may consider assigning assets to a corporation, limited liability partnership or company, or a family limited partnership, depending on specific state law. Alaska and Delaware authorize the placement of assets into asset protection trusts. Placement of assets into offshore accounts may be an option if done according to applicable law and U.S. taxes.
Should I Hire a Lawyer to Help Me Protect My Assets?
Protecting assets from creditors often is no easy task and you may need the assistance of a qualified legal professional. It is recommended to consult a business attorney if you need assistance in creating an asset protection plan. You attorney can determine the best asset protection plan available to you, which is a proactive way to deal with creditors.