Asset Protection Planning: An Overview

Asset protection planning is an important consideration for all individuals and businesses. No one wants to lose hard-earned assets or have her estate wiped out in a legal battle. Having a good asset protection plan in place is often most critical for those with substantial assets. This is true because wealthy individuals and companies are more likely to be singled out as targets for lawsuits and claims. Before a legal opponent pursues, he or it will attempt to uncover an individual’s assets. This is done to see how much money and assets one has to satisfy a potential favorable judgment. With the possibility of a large settlement, attorneys will often encourage legal action if a cause exists.

What Is Asset Protection Planning?

Asset protection planning provides ways to address this concern. It involves developing legal strategies and techniques to reduce or eliminate liability. The process begins by determining the level of risk. Therefore, an individual needs to identify all assets. This would include your primary home, other properties, investments, bank accounts and vehicles. Next, you develop strategies to secure each asset. This involves placing your assets in appropriate legal structures. Timing is very important. Asset protection planning needs to occur before you are in the middle of a legal battle. At that point, it may be too late to take adequate steps to protect assets. Removing your name from assets during litigation may cause complications. Options may still be available, but often, these options are limited.

Ownership Management

A primary goal of a good asset protection plan is to allow you to maintain control of your assets. The idea is not to be listed as the owner of particular assets. However, as a minority owner of the entity that owns the assets, you can still exercise complete control. This means you have the ability to reposition assets if the need arises.

Deterrent to Legal Action

An asset protection should also serve as a deterrent to legal actions. Your legal opponents will realize that a large settlement may not be possible. Since attorneys share in settlements, their financial incentive is reduced. Therefore, even if you are pursued, the result could be a fast and relatively cheap settlement. The plan removes the legal leverage opponents have against you. The best-case scenario is to avoid a suit altogether. However, a good plan protects you even if you are sued.

Protection after Lawsuit

Your asset protection plan should also prevent your opponents from seizing your assets after a lawsuit is over. Under a good asset protection plan, you should have provisions that allow you to move assets beyond the reach of a court order. If the planning is done properly, you should not have to take this step. Therefore, having a solid asset protection plan in place is usually enough to prevent legal action from getting to this point.

Asset protection planning can be complicated. Therefore, you need very competent professionals to assist you. Consider all of the factors involved. Make sure you have a clear understanding of the issues involved. The potential liability is too large to make mistakes. A lawsuit will be expensive whether you win or lose because the legal fees alone can add up to a substantial amount. Avoiding a lawsuit altogether is the best asset protection strategy you can have in place that also saves you a huge amount of money.