8 Asset Protection Strategies – How to Protect Your Wealth From Lawsuits

Written by promotiondept

November 13, 2018

8 Asset Protection Strategies – How to Protect Your Wealth From Lawsuits

The best offense is frequly a good defense. No matter how astute a business person you are, or how skilled you are as an investor, or how lucky you are with your lottery tickets, it does little good if you leave your assets hanging like a slab of meat in the water for trial lawyers to sink their teeth into.

Let’s face it: America is growing increasingly litigious, and the more assets people think you have, the more tempting a target you will become for frivolous lawsuits.

If you are a business professional or if you own a business, you could be hit by any of the following:

Protect Wealth From Lawsuits

Your business isn’t the only source of potial liability. Consider the following possibilities:

Bank Mortgage Payment Foreclosure

Make no mistake – bad things happen to good people all the time. You don’t have to be irresponsible or neglig to get sued. To protect what you have, it’s vital to take some defensive measures, to make it more difficult for creditors to seize your assets in the ev you lose a lawsuit, have a judgm ered against you, or are forced into bankruptcy.

If you are an repreneur of any kind, it’s important to separate your personal assets from those of your business. If you neglect to take specific legal steps to create a separate business ity, such as a corporation, limited liability company (LLC), or limited partnership, a simple business dispute could well cost you everything you own.

There are a number of business ities to consider:

Some professions generate more exposure to liability than others. If you are a financial advisor, an OBGYN, a real estate agent, or a professional in any other field that generates a lot of lawsuits for malpractice, keep your errors and omissions coverage paid up, and, if you can afford to, invest in extra or expanded coverage. But don’t stop there – you also need to enact these kinds of coverages:

Long Term Care Insurance

Federal law provides unlimited asset protection to ERISA-qualified retirem plans, and up to $1 million in assets in an IRA in the ev of bankruptcy. Some states provide even more protection to IRAs, though some states have opted out of the 2005 Bankruptcy Reform Act’s federal bankruptcy exemptions and exempt a lesser amount.

Check the laws in your state to see how much protection is provided to funds in these accounts. Speak to an attorney familiar with the laws in your state to determine whether creditors can opt between the state and federal exemption amounts.

If your state has a generous exemption, consider moving cash you won’t need until you reach at least age 59 1/2 into one of these protected ities. Bear in mind that you will be restricted by an annual contribution limit, which varies depending on the type of retirem plan. If you go over this limit or withdraw funds prior to age 59 1/2, you may be assessed penalties. Retirem accounts are excell vehicles to protect long-term savings, and provide substantial tax benefits, but need to be thoroughly understood and used with care.

Some states provide a lot of protection to home equity, which means that if you declare bankruptcy, the law prohibits courts from awarding home equity to creditors. In some states, including Texas and Florida, state law protects an unlimited amount of home equity. Other states provide relatively little protection to home equity in the ev of bankruptcy.

Check the laws in your state – if your state provides a generous tead exemption, consider contributing extra principal to mortgage payms to protect those funds. Principal contributions to the vagaries of the market are subject to risk, in that you will lose access to the equity and the cash if property values fall.

Alternatively, if your state provides a minimal tead exemption, accelerating mortgage payms or paying down principal may not make sense if you are looking to protect assets from creditors.

Examine how your home is titled. If you own your home with your spouse as ten by the irety, both you and your spouse own an indivisible interest in the home. If only one of you is named in a suit, creditors cannot force the other spouse to sell his or her interest in the house. Because the interest is indivisible, this can help you protect home equity where state law doesn’t provide a suffici tead exemption.

This option is only available in some states, and it only applies to your personal residence, not investm property. Other forms of titling include tenancy in common: joint ten with rights of survivorship.

The way you have a property titled can have profound ramifications in the ev a that creditor makes an attempt to seize Speak to a lawyer licensed in your state for specifics concerning your situation.

Legal Home Title

Some states provide significant protection to annuity balances and to assets in cash value life insurance policies. For instance, Florida provides unlimited protection to these assets, while Oregon provides protection for up to $500 per month in annuity . Each state has its own laws, so check with an attorney licensed in your state for specific exemptions.

Creditors cannot seize assets that you no longer own. Therefore, consider transferring ownership to irrevocable trusts, from which family members may be able to draw an or give the assets to family members outright, as part of a strategic gifting program. As of 2012, you can give away up to $13,000 per person without incurring a gift tax liability, subject to a lifetime gift tax exclusion of $5 million.

If you are in a high-risk profession, consider transferring assets to your heirs early – call it an “advance on your will.” If you don’t expect to need the money while you’re alive, you might benefit from watching them enjoy the inheritance.

You can’t wait until the lawsuit is immin before you make these moves. If you do, the courts could rule that your transfer of funds into a protected class is a fraudul conveyance and disallow the transfer, leaving those assets exposed.

Above all, don’t become a tempting target, and avoid displays of conspicuous consumption. This could attract trial lawyers and cause them to take a plaintiff’s case where they would otherwise pass on

This article is by no means a comprehensive guide to asset protection measures and strategies. Each case is differ, and the field of financial and legal planning interfaces with state laws to a significant degree. This is just an overview of some of the major issues and risk factors involved, and there is no substitute for ing with a qualified and d professional licensed in your state.

Categories: Bankruptcy, Credit and Debt, Featured, Insurance, Money Management

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8 Asset Protection Strategies – How to Protect Your Wealth From Lawsuits


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