Asset protection is a series of concepts, tools, and strategies used to protect assets and minimize potential liabilities. We live in a very litigious environment, so protecting what’s yours is more important than ever.
Today’s modern threats include:
- Economic Threats
- Personal Liabilities
- Business Operations
- Regulatory Issues
- And more…
Asset protection is not about illegally hiding assets (concealment), contempt, tax evasion, bankruptcy fraud, or fraudulent transfers. However, successful strategies can limit creditor access to certain assets while still within the bounds of debtor-creditor law.
Typically asset protection includes isolating assets that can cause liabilities, such as cars, buildings, and other property than can be damaged or cause damage, from assets that are income-producing or valuable such as retirement accounts. Did you know that some airlines create separate LLCs for each airplane? In the event of an accident, that sole airplane’s liability is isolated and contained from other airline assets.
Asset protection can play a significant role in divorce proceedings, business ownership, and potential tax problems. However, it is important to have effective asset protection in place before a claim or liability occurs since it is usually too late to initiate any worthwhile protection after the fact (ie: fraudulent transfers).
Some common methods for asset protection include using trusts, business entities such as LLCs and corporations, accounts-receivable financing and family limited partnerships (FLPs). Some jurisdictions are better than others, so proper planning can be complex.