Asset Protection Planning in the Age of Lawsuits

In the United States, the extent of liability seems to have no end. Wealthy individuals and successful corporations have regularly become targets for those seeking multi-million dollar settlements. To protect their hard-earned assets from opportunistic plaintiffs and predatory creditors, many individuals are educating themselves about debtor-creditor law—also known as asset protection planning.

What is Asset Protection Planning?

Nonexempt assets are subject to creditors’ claims, while exempt assets are not. This is the basis of asset protection planning. Asset protection planning encompasses a variety of legal techniques, all of which are designed to protect assets from civil money judgments. Common goals of asset protection planning are to create options in the event of a claim and to deter creditors from filing claims in the first place. Below are some tips to help you get started.

Start Planning before a Claim Arises

An innumerable number of things may be done to protect your assets before a liability or claim arises, but the options rapidly diminish after a claim is underway. The sooner you get a plan in place, the better. In other words, failing to prepare is preparing to fail.

Know the Difference Between Asset Protection Planning and Insurance 

Asset protection planning is by no means a replacement for a sound insurance policy. Namely, it won’t pay the legal fees or cover the cost of a settlement. Asset protection planning and insurance work together; the former aims to protect certain assets from the claim while the latter covers the cost of defending against it.

Understand the Difference Between Asset Protection Planning and Estate Planning

Sometimes the goals of asset protection planning and estate planning are aligned, but oftentimes they’re not. In certain situations, the making of gifts to children and/or prospective heirs can be construed as fraudulent.

Offshore Accounts aren’t Untouchable 

In recent years numerous cases have proven that it’s well within the power of the courts to repatriate defendants’ money back into country. Debtors who fail to comply with repatriation orders may be held in contempt of court.

Bankruptcy offers Limited Protection

Bankruptcy is a last resort, but recent changes to bankruptcy law have made it an even less inviting option. In certain situations, “protected” assets may be accessible to creditors.

Simplicity over Secrecy 

Because every aspect of your asset protection plan may come under scrutiny, simplicity and transparency are key. If you can’t explain how and why certain assets were transferred from one area to another, you may end up digging yourself into a deeper hole. Simplicity and transparency are your greatest assets in the face of civil money judgments.

Asset Protection Planning with Cohen & Burnett

For over 25 years, Cohen & Burnett has distinguished itself as a premier estate planning law firm in Washington, D.C. Our expertise includes estate planning and administration, tax law and preparation, and retirement planning. If you’re interested in asset protection planning, please visit our homepage for more information or contact us today.





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