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How do I know if I need an asset protection plan, and what techniques do I use if I do?
People who have assets that could be taken away by creditors or by people who bring successful lawsuits against them, will want to consider ways to protect those assets. Some people are at greater risk because of their professions or activities. For example, doctors are in a profession with a high risk of malpractice lawsuits. If a malpractice judgment isn’t completely covered by a doctor’s malpractice insurance, the plaintiff might come after the doctor’s private assets. So people in professions with a high risk of lawsuits or who engage in dangerous activities, like flying or racing, should be particularly careful, but similar experiences might happen to just about any person. Anyone who drives might have an automobile accident where someone is injured and a judgment could be greater than the amount covered by the driver’s vehicle insurance. Anyone who owns property could be sued if someone is injured on the property and all the damages might not be covered by homeowner’s insurance.
In this kind of tragic circumstance the people who have been sued for debt or for damages could lose everything that they have worked their whole lives to build up, even if they are near retirement age. One solution is to have better insurance coverage, and another is to hold assets in a way that makes it difficult or impossible for others to take them away. In that way, you can ensure you don’t lose everything you have.
There are many possible techniques you can use to protect your assets. The laws of each state are different, and you should find out what property can be taken from you under the laws of your state. For example, several states have homestead laws, which protect all or part of your interest in your home from creditors. You could also transfer property to someone else, as long as you don’t do it with the intention of defrauding a creditor. For example, you might give title to the farm you live on to your son and his wife. If you did that your creditors couldn’t take the farm to pay your debts, because the farm is no longer yours. The downside is that if someone sues your son and daughter-in-law, their creditors could take the property if your state law allows that.
There are pension plans, insurance policies, and trusts that can help you protect your property. It might also help you to incorporate your business and protect yourself from personal liability that way. If your business has several owners, you might want to insure against losses that might occur if one owner dies or becomes disabled.
It’s important to note that this isn’t an area where people should try do-it-yourself remedies. Corporations, trusts, and insurance policies only work if they are done properly and maintained properly. There may also be serious tax consequences that make one option a bad choice for you. For example, if you sign over the title to your property to your son, you may owe a large amount of gift tax as well as creating other tax consequences. If you have assets worth protecting, you’d be well advised to consult with a qualified asset protection attorney for advice and help in setting up your asset protection plan and choosing the options that work for you. |
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