Asset protection is an area of law designed to ensure that the assets you have worked to accumulate are legally safeguarded from third parties.
This can include protection from creditors, legally minimizing unnecessary tax liabilities when transferring property, and protection from any other third parties attempting to collect funds in the future from your assets, such as future civil plaintiffs in litigation suits.
How to implement an asset protection plan
When implementing an asset protection plan, a transfer in legal title is used. This can occur through the transfer of property into a trust account, gifting property to a spouse or child, or investing assets in a limited liability business.
However, creditors can challenge transfers of a legal title, if there is the appearance that the transfer was not done “in good faith” and was done specifically to hide assets from creditors currently trying to collect funds.
There are requirements under federal law that state that the creditors must prove, in order to prove that a person fraudulently transferred property. A thorough asset protection strategy can help mitigate that risk.
Your asset protection attorney can assist you in coming up with an asset protection strategy to mitigate risk. They have the ability to prepare trusts with the necessary language and provisions you need and properly transfer titles. For example, if you are investing in a business, your asset protection attorney can ensure that the business has all of the requirements necessary to limit a creditor’s access to the funds invested.
If any of these actions are implemented incorrectly, the creditor, IRS, or other third party collector still may be able to gain access to the funds you are trying to protect.
Choosing the best asset protection strategy
Additionally, an asset protection lawyer can review your assets and determine which methods of protection are best for your specific property and goals. Your attorney can evaluate tax provisions, different types of trusts, and different types of clauses to include in your trust. They also can help you find or create a business opportunity to invest your funds for maximum protection and preservation.
For example, if you want to establish a trust, a lawyer can counsel you on your options for trustees and beneficiaries, as well as which property you can include in the trust to maximize your level of protection for your assets.
Proper language within the instruments you establish is key to safeguarding your assets in the future. Ensuring that your asset protection strategy reflects honest property transfers, contains the necessary provisions to protect your assets, and is executed legally so that the provisions themselves are enforceable, all are imperative tasks that your asset protection attorney can help you accomplish.
Your attorney will be able to counsel you on the specific language needed to prepare an irrevocable trust and establish the requirements for withdrawing funds from that trust if certain requirements are not put in place on the trust that restrict your ability to withdraw funds freely from the trust for any purpose.
An asset protection lawyer also will know the most current statutes and case law affecting asset protection. New case law can substantially influence the steps needed to legally protect your specific assets as the area of evolves.
To learn more about how to most effectively protect your assets or to meet with an asset protection attorney, contact Cordell Planning Partners.