Asset Protection

Why is Asset Protection necessary?

It is unfortunate that we live in such a litigious society where a person is never more than one mistake away from having everything that he/she has worked for put at risk in a lawsuit. Alternatively, creditors can try to take away assets for various reasons. Given the volatility of business fortunes, people occasionally make mistakes that potentially threaten their long-term financial future.

When your insurance has policy limits or will not cover claims filed against you, it will be your assets that are at risk in a lawsuit. When someone obtains a judgment against you, it will be your assets that they are able to come after to satisfy the judgment. While some categories of assets are off limits to judgment holders, almost everything else is fair game. This means what you have could become what they have with a few strokes of the pen.

If you work in a profession that is prone to lawsuits, this is even more of a risk for you. For example, if you have a professional practice, your malpractice insurance may only provide so much protection. Similarly, if you are starting a business and have to guarantee your loans, you may also be at risk of losing your assets if things do not work out as you hope.

Asset protection means things do not have to be this way, and you do not need to place yourself at the same degree of risk. Through various proactive steps you can take ahead of time, you can build a proverbial fence around most of your assets to keep them out of the hands of creditors and judgment holders. Once a case goes to court, you have little to no control over the outcome and whether everything you have worked for will be threatened. Asset protection is advisable to give you peace of mind.

What does it mean to protect your assets?

Protecting your assets means you preserve them for both your personal use and for the use of your family in later generations. Asset protection means you have taken any of a number of possible steps to either change the form of ownership of the assets or the location of ownership in order to make it difficult for creditors or judgment holders to reach your property. These structures separate you from your assets, either through ownership changes or relocating assets to jurisdictions where creditor claims are difficult to enforce.

When working with an asset protection attorney, you can craft a plan that balances your personal control over assets with legal protections. By using tools like irrevocable trusts, LLCs, and offshore accounts, you can safeguard your wealth for your family’s future.

While there are no guarantees in the practice of law, proper planning can give you much greater peace of mind that your assets will remain secure if ever threatened. When done effectively, asset protection greatly limits the amount of assets that judgment holders can get from you. It is important to remember asset protection steps must be taken within the confines of the law and are completely legal so long as they are done properly.

When protecting your assets, your attorney will scrutinize the laws of various states and offshore jurisdictions to form a strategy for where to hold your assets and who should exercise control over them. Asset protection makes as many of your assets as unreachable as possible. Thus, even if you transfer control of your assets to someone else, you still benefit from them, but no one else can without your consent.

What do you want to protect?

After a lifetime of work, you will hopefully have a number of different assets and properties you will want to keep safe from creditors using asset protection. To devise the strongest possible asset protection strategy, it is helpful to know ahead of time exactly what you want to protect. Then, working with an asset protection attorney, you want to figure out which of these assets are already protected by law and which assets you need to take steps to protect.

The good news is that in many states, one of the most important assets of all—your home—may already receive some degree of protection from creditors due to homestead exemptions. Hopefully, you have other assets in your portfolio besides your home. For example, you may have other investments, including stock market investments and cryptocurrency, that do not fall under any exemption.

You may have various assets that need protection, such as:

• Real Estate: Your home may already have some protection due to homestead exemptions, but you may need additional strategies for other properties.
• Bank Accounts: Liquid assets are often targeted by creditors, so transferring money into accounts that are legally protected is crucial.
• Investments: Stocks, bonds, and cryptocurrency require specific asset protection strategies to shield them from legal risks.
• Retirement Accounts: While some retirement accounts have statutory protections, they may still be vulnerable in certain situations. An asset protection attorney can help you maximize the protection of these funds.

By working with an experienced asset protection attorney, you can develop a plan that covers all these assets and more.

How does Asset Protection work?

The first step in the asset protection process is finding an attorney who focuses in the field. While you may be tempted to do it yourself to save money, this is an area where you need to do everything right. If your asset protection strategy is based on false assumptions or if someone has made an error, you may be unprotected when you previously thought your assets were safe. You want to find an attorney who understands the complexities that come with creating an asset protection plan and who focuses on asset protection.

When you retain Asset Protection Attorney Blake Harris of Blake Harris Law, he will guide you through the process of creating and using various asset protection tools for safeguarding your wealth. Blake will take the time to listen to you while applying his professional expertise to your situation and answering any questions you may have. Blake has extensive experience with asset protection planning.

Once Blake has spoken with you and understands what you are trying to accomplish, he will recommend an asset protection strategy for you. This may involve moving assets to certain places or creating various trusts to hold some of your assets. In consultation with Blake, you will have to decide what you are comfortable with in terms of domestic and offshore asset protection options.

Asset protection may involve executing a range of legal documents that transfer decision-making power over some of your assets to trustees. It may include steps to create various corporate entities and transferring your assets to these entities because of the protections they provide. Then, you may need to shift other financial assets into certain accounts that are protected from creditors. For example, some states may have absolute protections for retirement accounts as well as other safeguards for other types of annuities that provide you with an income. The most important thing to remember is that the further in advance of a lawsuit that you implement your asset protection plan, the stronger the protection you receive over your assets.

Asset Protection Strategies

Asset protection can be done successfully using a number of different strategies. There is no single overarching way to protect your assets. Instead, you will need to complete many different steps as part of an overall strategy. The first step toward asset protection generally involves purchasing insurance that can provide you with a relatively wide degree of protection. However, the mistake that many people make is to stop after simply purchasing a policy. Insurance does not always protect you to the extent you need and when you require it. As a result, you need other tactics. There are several different moves which we will describe below that can be considered forms of asset protection.

You can create a limited liability corporation for a business or to hold property. Then, your liability extends only to the LLC’s property, and you are not responsible for anything else beyond that. Some people create LLCs specifically to own property. Others create a structure of multiple LLCs to further minimize risk.

Another asset protection strategy is to create a trust. In this case, you transfer property to the trust, which is under the control of a trustee. Trusts can be either onshore or offshore. There is generally a greater degree of protection for offshore trusts. The trust essentially becomes an identity separate from the grantor since it is a new structure with control that is separate and distinct from the person who has beneficial ownership of the assets.

Additionally, you can move some of your assets into accounts that enjoy statutory protections from creditors. For example, retirement accounts are protected to a degree from judgment creditors in some states, but not necessarily from bankruptcy court above a certain amount. Further, some annuities and life insurance policies are protected provided they are for the benefit of the person who is seeking to shield his/her property.

Can a Trust protect assets from a lawsuit?

Yes, a trust can provide protection from lawsuits and creditors but its effectiveness largely depends on where and how the trust is structured. One of the key distinctions is between onshore (domestic) and offshore trusts.

• Onshore trusts, such as those established in the United States, can provide a degree of protection, but they are subject to U.S. court rulings. In many cases, if a U.S. court deems you to have too much control over the trust or its assets, it may rule that those assets are not protected.
  
  
• Offshore trusts, by contrast, are formed in foreign jurisdictions with strong asset protection laws. These jurisdictions are specifically chosen because they make it significantly more difficult or even impossible for creditors to reach the trust assets through U.S. courts. Offshore trusts often provide more robust barriers to legal claims.

The strength of any trust depends on legal separation between you and the assets. That means transferring meaningful control to a trustee and structuring the trust in a jurisdiction that respects and enforces asset protection. Onshore or offshore, proper setup and timing are important if done too late, even the best-structured trust may not protect your assets.

Blake Harris Law helps clients explore both domestic and international trust structures customized to their specific risk profile and financial goals.