Saturday, April 12, 2014

Key Facts You Should Know About Asset Protection Planning

By Anita Ortega


The kind of assets one has today can define their tomorrow. However, there are situations where creditors can repossess these assets. So, wise people have strategies to protect their assets against liens, repossession or lawsuits. In most cases (and depending on the financial situation of an individual), asset protection planning may require some knowledge on Bankruptcy Laws, Estate Planning laws as well as Tax laws.

Now, if you thought this is away to cheat your creditors or evade taxes, you are seriously mistaken. Instead, the asset protection program aims to guarantee the safety of your vital assets like cars, houses, cash in the bank and retirement benefits should you encounter an unprecedented financial crisis. Mostly, the type of plan you create should be based on your total wealth and financial goals.

It suffices to say that individuals with the potential of undergoing insolvency (due to the risks attached to their investments) need the program the most. It is worth reiterating that even for these individuals; this program is not a means to hide an individuals wealth. In fact, it should not give way to misappropriating funds from a trust.

Unlike what many may think, asset protection program is not limited to individuals and their families. Instead, it covers dozens of asset groups. For example, it can be about a business entity or a dynasty trusts. Assets such as umbrella insurance policies, discretionary trusts, exemption planning, special needs trusts, and family limited liability companies can also form part of the plan.

Individual arrangements and family trusts make another group of assets eligible for protection. Your plan may also involve offshore corporate trust and investing schemes in some cases. In some jurisdictions, credit shelters and such like can be protected legally.

If you want your plan to succeed, you must do it early. In other words, draw the plans and involved your lawyers before the creditors make their claim on your property or sue you. Otherwise, late submission may lead to bankruptcy case and settling the legal expenses of the program.

If done properly, this kind of strategy has a number of benefits. First, it helps you to categorize your liquid assets in a way that creditors cannot pursue them. In fact, the more liquid assets you have in checking account, for example, the easier it is for creditors to recover it. Planning also reduces the chances of lawsuit as most of your property is protected. You should know that creditors can only sue you for unprotected property and the fewer such are the better for you.

Protecting assets can also help in covering what an insurance policy left out. Well, it is common knowledge that all insurance agreements are tailored to cover only specific areas of your life and wealth. So, all the important assets you insurance cover could not guard can be safe through a protection plan. Asset planning also secures your wealth and money even if you had an accident or became jobless. As a matter of fact, your financial situation does not expose you to creditors repossession or lawsuits.




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