You never know what life will throw at you, so it’s important that you prepare for the unknown and unexpected. This includes protecting your assets in an appropriate, safe, and timely manner. Asset protection is the process of safeguarding one’s wealth against those who may have claims against it such as creditors or a former spouse. This is often done by converting your wealth into an asset-protection trust and thus keeping it out of the jurisdiction of the court. Here are 9 rules to remember about asset protection.
1. Do it BEFORE you get sued or a claim arises
Once someone files a claim against you, there’s not much you can do in regards to protecting your assets. It’ll be too late and it would be considered a “fraudulent transfer”. A “fraudulent transfer” involves the intent to cheat creditors.
2. Late planning can backfire
Doing it too late will not only be of no help, but also will backfire. Both the debtor and whoever assisted in the fraudulent transfer can become liable for the creditor’s attorney fees, and the debtor can lose the hope of getting a discharge in bankruptcy.
3. Keep it simple
If you can’t explain your asset protection, then it most likely won’t work out. If it is too complicated for the client to understand then a judge will get suspicious of what is actually going on. The best asset protection plans are often simple plans, such as creating and funding an irrevocable trust for the benefit of your children.
4. Keep your business and your personal assets separate
The best place to keep your personal assets are in a trust. When they are properly drafted and funded, laws specifically in place protect trust assets. Business assets should stay in business entities in order to protect you from personal liability.
5. Asset protection is not a substitute for insurance
Instead of replacing insurance, asset protection should be supplemental. It it good to have both of them so you can overall coverage for everything.
6. Do not hide things from your creditors
Hiding things from your creditors will only make things worse. They have many tools at their disposal so if they were to discover that you are hiding assets, they can use it against you.
7. Avoid scams
There are a lot of companies out there advertising to provide asset protection services for a small fee. Beware of these ads and make sure to go to a credible lawyer to do your asset protection.
8. Don’t count on bankruptcy
Some people have come to think that filing for bankruptcy is a good solution when you have no choice. Doing so should be your last and final resort. Bankruptcy code and new bankruptcy case law can make parts of asset protection plans very difficult to protect in bankruptcy. Bankruptcy judges can also make you hand over your assets.
9. Usually everything sees the light of day
Asset protection is there to make your life easier. It keeps your assets private and organizes them so that they help you with your creditors.
These are the nine important rules that every individual should take to avoid or, at the very least, help protect your wealth and assets. Preparing for potential lawsuits is never an easy task. However, if you don’t plan, you may find yourself losing a lot more than you bargained for. If you are interested in protecting your assets or have more questions, do not hesitate to meet with Attorney Inna Fershteyn. For more information call us at (718) 333-2394 or visit our website, BrooklynTrustandWill.com