For years, asset protection has been considered a gray area in the legal world. Many don’t seem to understand how it exactly works. Back then, it’s not uncommon to hear attorneys dismiss the importance of asset protection and how it can help preserve your assets in case of lawsuits or creditor claims. Some even think this is a way to defraud a creditor, hence, illegal and could get them to jail.
Is asset protection legal?
The truth is that asset protection is an entirely legal process.
After years of development, lawful means for protecting one’s assets have finally found a place in legal practice. The American Bar Association through its Real Property, Probate and Trust Section created the Asset Protection Subcommittee several years ago. This is to recognize the importance of safeguarding assets and estate planning through legal means, not just for the affluent class, but also for businessmen, entrepreneurs, and other professionals.
Today, asset protection is a well-recognized area of practice in the legal field. Laws relative to the preservation of wealth have spread to several states and over 20 countries. But despite this acceptance, many still don’t understand what it is, how it works, and why they need it.
Understanding asset protection planning
Investopedia defines asset protection as “the concept of and strategies for guarding one’s wealth.” It is a form of financial planning with a goal of “insulating assets in a legal manner without engaging in the illegal practices of concealment, contempt, fraudulent transfer, tax evasion or bankruptcy fraud.”
Contrary to famous misnomers, asset protection is not about concealing one’s assets to avoid taxation or defraud creditors. These strategies follow completely legal procedures intended to preserve one’s wealth. In the face of numerous lawsuits filed against business owners, with sometimes disastrous and devastating outcomes, asset protection is a must.
How do asset protection services work?
Asset protection services are at the forefront of providing ethical and legal assistance to individuals who want to leverage on the protective concepts, tools, and knowledge of this legal specialization. Consultants at CS&P explained that their work is to assist clients in finding the best strategies, developing a plan, and implementing this plan to meet the client’s overall financial objectives.
When you hire asset protection services, a specialist will work closely with you to come up with a tailored, comprehensive plan. They will evaluate your assets, identify the potential risks and vulnerabilities, and determine the methodologies that can be implemented.
Asset protection services also help clients understand the complex legal strategies and techniques necessary to ensure complete preservation of assets. Since each client has unique circumstances, needs, and financial objectives, in-depth knowledge of both domestic and international laws is vital to determine the most applicable strategies. Likewise, many of these methodologies require expertise and experience; any mistake might get you into legal troubles later on.
There are several asset protection techniques available. Some of the most common strategies include establishing an appropriate business entity (such as corporation and LLC), limited family partnerships and account-receivable financing. Other possible approaches include solutions in offshore jurisdictions, asset protection trusts, and private foundations.
Generally, asset protection methods are best initiated before a liability or claim occurs. Often, it is futile to begin planning how to secure assets once liabilities, such as a lawsuit or divorce, has been filed. Proactively protecting your assets is considered a deterrent to potential lawsuits and not a counter-action. Many creditors don’t want to waste time and money trying to break through a solid asset protection plan. So, when they know that your assets are insulated, they are less likely to pursue a case against you.
When properly executed, asset protection can limit creditors’ access to your wealth as well as shield your asset from the long arms of the law. If you haven’t started working on ways to shield your assets, there is no better time to start than now! You don’t want to wait for creditors to come knocking at your door before you begin protecting your assets.
You deserve to enjoy the wealth you’ve worked hard to accumulate. Get the help of asset protection services and begin planning for the future today!