Asset protection is an essential strategy in our litigation-driven society. In most cases, any property, held personally in your name, can be vulnerable to a claim from a judgement creditor. Most people usually can’t anticipate all the miseries which may occur and never build “an Ark” for themselves. But statistics demonstrate that a common problem is that your assets may be subjected to a claim from a creditor who receives a judgment from the court as a result of a lawsuit. For example, such state as California has very weak asset protection legislation and it is required to make additional steps in order to protect your possessions. So, here are a few guidelines to make you feel safer and better financially protected:
1) Always map out your Asset Protection Plan before you get sued, not after!
When a lawsuit has occurred, it is usually too late to set some protection measures and there is not so much you can do.
2) Keep your business and individual assets separate.
You can have problems if you don’t insulate your personal assets from your business assets and vice versa. Having a single bank account can also cause a problem.
3) Take into account the risks of having a multiple partners in your business.
In the case of a two-man (or more) partnership you run double risks as you as well as your personal assets are potentially vulnerable for your partner’s’ mistakes and debt.
4) Always Use a Corporate Entity that Limits Potential Liability in order to protect your Assets.
Most business-people don’t realize that there is a high risk in keeping a property in his or her name. That may result in you bearing responsibility for all the errors and debtors resulting from your business. You can select from a number or structures to protect your assets and limit your liability. The following entities are completely separate legal organizations for you to choose:
– PLLCs – Professional Limited Liability Companies
– LLCs – Limited Liability Companies
– LPs – Limited Partnerships
5) Always consider implementing a Domestic Asset Protection Trust as one of the best ways to save your assets from any future creditors.
If drafted properly and in the right jurisdictions, potential and future creditors are limited to what they can recover. Thus when the assets are moved into trust, the creditors less likely to be able to attach a claim against the assets.
When planning your asset protection, you should consider all types of property, such as bonds, annuities, stocks, insurances, inheritance, businesses, antiques and artworks, precious gems, bank accounts etc. The issue of assets protection is rather complicated and has a number of pitfalls. Therefore we invite you to contact our team of legal professionals at the Morgan Legal Group and discuss your individual situation and ways to protect your property.