Understanding Asset Protection Planning

Asset protection is the process of safeguarding your wealth when times are good, so that when times become bad, you’ll be protected from economic downturn or other trouble. The people who most often think about asset protection work in fields where they are likely to get sued, but that doesn’t mean you shouldn’t give it some thought as well.

On the larger scale of things, asset protection is the debtor’s (you) side of creditor-debtor law. Creditors are concerned with collecting their debts, and debtors should take interest in strategies for protecting their most valuable assets from those creditors.

Keep the following rules in mind when planning how to keep your assets safe:

Begin Planning Before a Claim Arises

There are many things you can do to protect yourself before any issues arise, but there is very little you can do after the fact. Claims often begin long before you receive any notification of such, so plan early and protect yourself right away.

Asset Protection is not Insurance

While taking measures to keep your assets safe is important, it is not a substitute for liability and professional insurance. An asset protection plan will not pay legal fees if you are taken to court. If you find yourself on the receiving end of a lawsuit, make sure you have insurance to pay for your defense.

Don’t Count on Bankruptcy as a Last Ditch Effort

There was once a time where announcing bankruptcy would allow a debtor to eliminate their debts while retaining many of their assets, but that time is no more. Bankruptcy laws changed in 2005 to make it such that things like homestead exemptions are much more limited, and it gave bankruptcy judges more powers to force a debtor to forfeit their assets.

Keep it Simple

A common mistake people make is that their asset protection plans are so complex that they can’t even explain how they work in court. When that happens, it makes the judge and jury suspicious of what you’ve been doing with your assets, and can cause them to find fraud or disregard the entities you’ve created for protection.

The best asset protection plans are often simple, such as creating an irrevocable trust for your children.

Planning for asset protection, creating the necessary entities or trusts, and making the appropriate transfers can be confusing and intimidating for someone who has never done it before. The team here at the BCN Law Firm in The Villages will sit down with you each step of the way, and will help you make sure your assets are safe from creditors. Call us today at (352) 775-4739 to schedule your consultation.