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Asset protection is the process of protecting your money. An asset protection strategy is one aspect of financial planning that is used to safeguard your resources from creditor claims. Asset protection strategies for business owners and individuals reduce a creditor’s ability to access specific resources while working under the constraints of debtor-creditor law.
Asset protection safeguards assets and resources in a legitimate way that does not involve any illegal activity such as concealment, fraudulent transfers, tax evasion, contempt, or bankruptcy fraud. The best time to begin asset protection is before a claim or liability arises, as it is often too late to provide beneficial protection after one of these has occurred. Three of the most popular approaches to asset protection are asset protection trusts, family limited partnerships (FLP), and accounts-receivable financing.
For someone who has very few assets, bankruptcy may be the best route as opposed to creating a personal asset protection plan. However, if more important assets are at stake, having an asset protection plan is strongly encouraged. There are some resources like retirement plans that are exempt from creditors due to the United States federal bankruptcy and ERISA (Employee Retirement Income Security Act of 1974) law.
Additionally, multiple states provide exemptions for a certain amount of home equity in a primary residence along with other personal resources like clothing. Regulations are also set up in each state to safeguard corporation owners, limited partnerships (LPs), and limited liability corporations (LLCs) from liabilities, providing more options for corporate asset protection and LLC asset protection strategies.
Joint ownership that is covered under tenants by entirety counts as a type of asset protection. A married couple who holds mutual interest in a residence under tenants by entirety shares a claim to the entire property and not just subdivisions of it. This means that a creditor who has a claim against one spouse will not be able to include the property for their debt reclamation. However, if a creditor has a claim that includes both spouses, the tenants by entirety conditions would not secure the assets from the creditor.
One way to create a personal asset protection plan is to list the account or property in the name of a family member or a trusted resource. An example of this is when someone is given ownership of a residence, but the actual owner continues to dwell on the property or use it. In this case, seizing the property would be challenging as actual ownership would have to be resolved.
Disclosure: Asset protection plans should be developed and implemented well before problems arise. Due to the fraudulent transfer laws, asset transfers that occur close in proximity to the filing of a lawsuit or bankruptcy can be interpreted by the court as a fraudulent transfer. Proper structuring of these assets is imperative please seek proper legal and tax advice prior to engaging in re-titling/structuring of any assets. Please note that laws are subject to change and can have an impact on your asset protection strategy.
Wall Street Financial Group, Inc., an Illinois corporation, is a Registered Investment Adviser in the states of Illinois, Missouri, and Tennessee. Carl Zeidler and John Zeidler offer investment advice through Wall Street Financial Group, Inc.
We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives.
Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product.
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