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Call Now For A Consultation
Call Now For A Consultation
In protecting your assets, the same rule applies as in investing, gambling, and even budgeting: aim to keep your winnings. It is also important to start thinking about estate planning early in your life, come up with as simple a plan as possible, and not to attempt to hide your assets from your creditors (including ex-spouses). After all, there is no up-side to ending up in jail.
The following steps give you the best opportunity to protect your estate from potentially large losses. Most people think about asset protection when they are feeling flush; you should also take the time to consider the topic when you are going through difficult, and perhaps costly, times. It is always best to do your asset protection planning with an accomplished estate planning attorney who knows all the ins and outs of current laws and all the techniques to best protect your accumulated wealth.
While you can take several steps to protect your assets before a claim or liability arises, if you wait until afterwards, the damage may be inescapable. This is because if you take steps to protect your assets after a claim, you can be accused of “fraudulent transfer.” If you don’t preplan for such possibilities, you may be liable for your creditors’ attorney fees over and above any other liability, and you may not be able to discharge any of your debts in bankruptcy.
Asset protection planning should be viewed as a supplement, not a substitute, for liability and professional insurance. Here are a few reasons: (1) plaintiffs can come after you whether or not you have a viable asset protection plan (2) an asset protection plan doesn’t pay legal fees attached to a lawsuit (3) insurance can come to your aid if a fraudulent transfer claim is made against you.
Corporations, partnerships and LLCs are business entities. Putting personal assets into a business entity opens you up to creditors. It is necessary to protect personal assets by putting them into well-drafted, properly funded trust.
It is best to balance asset protection planning so that you have sufficient control to feel comfortable, but not enough that your creditors have grounds to claim that you and the trust are one and the same.
Though asset protection planning and estate planning often work in tandem, they are sometimes at odds. An example of this is gift-giving to prospective heirs which can sometimes be construed as fraudulent transfer.
Recently, courts have been recognized as having the power to require debtors to bring their money back to the U.S. through “repatriation orders.” If debtors fail to do so, they may be held in contempt and have to spend time in jail.
In 2005, bankruptcy laws changed considerably. Not only have state homestead exemptions been substantially limited, but new provisions in the bankruptcy code have made asset protection plans more difficult to protect.
When asset protection plans become complicated, they are often more vulnerable during depositions or debtor examinations. This is because when individuals whose assets are being investigated are unable to easily explain their decisions, judges become suspicious. Simple plans, like creating irrevocable trusts for your children, are often best.
You should always assume that all of your asset protection planning will, at some point, become visible to creditors. Presuming that you will be able to keep secrets is extremely risky. If you fail to make full disclosure during divorce proceedings or when declaring bankruptcy, you will almost always end up in trouble, faced with charges of perjury or bankruptcy fraud.
Because of the many potential pitfalls, it is always wise to work closely with an experienced estate planning attorney to protect your assets.
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