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How to Protect Your Assets From Creditors

To protect your assets, it’s essential to take a proactive and defensive measures, so that in the event you lose a lawsuit, have a judgment entered against you, or are forced into bankruptcy, it’s more difficult for creditors to seize your possessions.

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How well are your hard-earned assets protected from lawsuits?  Most people don’t have their assets well protected, and since we live in a litigious society, it could be a very costly mistake.  

Here are some ways to legally protect your assets and to help ensure you don’t lose your most important possessions to creditors.

Trusts

There are two kinds of irrevocable trusts that serve as asset protection tools: domestic asset protection trusts and foreign asset protection trusts.

While asset protection trusts must be irrevocable to uphold the trust property, they do offer a great deal of flexibility and protection, not only for your own property but also for the property gifted to, or inherited by, your loved ones. 

This type of asset protection planning can become complicated and should only be attempted with the proper assistance and counseling of an experienced lawyer. 

Business Entities

If you are an entrepreneur, it’s crucial to separate your personal assets from those of your business – failing to take specific legal steps to create a separate business entity could cost you everything you own from a simple business dispute.

There are a number of business entities to consider such as a corporation, limited liability company (LLC), or limited partnership.

Bottom line is: in all matters, treat your company as a separate entity from your personal one, and shield yourself with multiple asset protection strategies.

Equity Stripping

Equity stripping, a process of reducing the overall equity in a property, is considered by many experts to be one of the simplest asset protection methods.  It is also one of the most successful ways to protect your assets from lawsuits and creditors.

By giving another party a claim against a property, you as the owner will be able to retain control over the cash flow and use of the asset, at the same time making your property unattractive to creditors attempting to enforce some type of legal judgment.

An effective strategy to discourage a party from going after your property and a common form of equity stripping is Home Equity Lines Of Credit (HELOC).  It gives the lender a lien against the equity of the property, and the property serves as collateral for the loan.

Creditors cannot seize assets that you no longer own, so transferring ownership to irrevocable trusts, from which family members may be able to draw an income or give the assets to family members outright, would be a strategic part of your gifting and an asset protection tool.

High-risk profession individuals can consider transferring assets to their heirs early – if you don’t expect to need the money while alive, they might benefit from watching their loved ones enjoy the inheritance.

Own Insurance

Insurance can be a part of the asset protection planning, since it can help a debtor survive a fraudulent transfer claim.  In case you get sued, the insurance company would pay to defend you and pay to settle it.

This is especially important for some professions that generate more exposure to liability than others.  If you are in a profession that can generate a lot of lawsuits for malpractice, keep your errors and omissions coverage paid up.  If you can afford to, invest in extra or expanded coverage.

Investments

Various investment accounts, such as individual retirement accounts (IRA), carry a certain amount of asset protection.

Federal laws protect many retirement plans; in addition, many states also offer asset protection trusts that safeguard homesteads, annuities, and life insurance.

Offshore Asset Protection Trust

Some experts consider the offshore asset protection trust to be one of the strongest ways to protect your assets from lawsuits; at the same time, some recent cases have recognized the power of courts to require debtors to bring their money back to the U.S. through what are known as “repatriation orders”.  It’s highly advisable to get informed on all the benefits, as well as the risks and limitations.

This is by no means a comprehensive guide to asset protection planning and strategies.  

Before you take any of the steps discussed above and for them to be legally valid, meet with an asset protection attorney who is familiar with the laws of your state.

The Levin Law Group offers Asset Protection to protect your assets from creditors.

At the Levin Law Group, our reliable and caring attorneys will assist you with legal techniques that can help prevent the seizure of your assets in the event of a judgment, deter a lawsuit, and provide you with settlement negotiation power.

We invite you to get in touch with us today for a free consultation, so our lawyers can help you take steps to ensure your interests and assets are protected – contact Levin Law Group today: 800-517-5240.