If you’re wondering about what asset protection is, it’s a legal strategy used by businesses and individuals to shield their assets against legal judgments. The asset protection strategy protects the valuable assets of enterprises and individuals against creditors’ claims. They employ this method to prevent creditors from obtaining particular assets while remaining within the bounds of debtor-creditor law. Learn more about it below.
How Exactly Does Asset Protection Work?
If you own real estate, businesses, or other types of wealth, you want to make certain they’re legally protected against those who may want to make a claim on them. People such as your former spouse or creditors are individuals most likely to claim. In the event that they file a lawsuit against you and win, you are at risk of losing all or part of your property, depending on the court’s decision.
There are ways to prevent such a scenario. One way is to use an LLC or Limited Partnership to safeguard your properties. Take note that the court can also seize any assets under your name. To avoid this, you can separate your business and personal assets by using a limited liability company. Because you aren’t the sole owner of these assets, the court is unable to seize them in the event of a lawsuit. But you’ll have to meet certain requirements to ensure proper protection is in place. In certain states such as California, the protection laws are weak so you’ll need to take extra steps to get full protection. Hence, it’s important to understand the state’s law so you can take the correct measures to safeguard your assets.
Essentially, asset protection helps you protect your assets in a legal way. It prevents asset owners from engaging in criminal acts like fraudulent transfer, asset concealment, tax evasion, and bankruptcy fraud.
When Should You Start Protecting Your Assets?
It’s advisable to execute an asset protection strategy long before any liability or claim occurs. If not, it could be too late to carry out any form of protection if your spouse or creditor has initiated a claim. Asset protection safeguards your interests so do it early. You won’t become easy prey for anyone looking to make a claim on your assets.
What are the Benefits of Asset Protection?
You stand to gain from protecting your assets. One major benefit is preventing lawsuits. Legal battles are expensive and tedious. Even if you win your case, you might still incur some form of legal expenses. So if you can prevent a lawsuit from happening in the first place, you’ll save yourself time and money. A well-crafted asset protection strategy makes it difficult for others to make a claim on your wealth, preventing lawsuits against those who are eyeing your fortune.
Also, it helps prevent your assets from being seized in a lawsuit. With an offshore asset protection trust, your local court or former spouse can’t make a claim on your assets because they aren’t subjected to local court jurisdiction.
