Asset Protection Planning

How Advance Asset Protection Planning Can Help Avert A Crisis

Asset protection planning can greatly reduce the risk of your assets ending up in unwanted hands, due to claims and judgments in a civil court. The planning is far more likely to be effective if it is carried out well in advance of any potential problems occurring, as there are legal limits on what can be done once proceedings have started. It is also far more likely to be effective if you can quantify what the threat is likely to be. While there are some financial instruments which are effective in many different situations, others are quite specific.

Some eventualities for which you need to plan are certain to happen. The most obvious of these is death, and if you have substantial assets you will need to protect them as far as possible from inheritance taxes. You can do this by establishing an irrevocable life insurance trust, and making payments into this trust in the right way. A lawyer will need to advise you on this, as it is so easy to make mistakes and leave yourself open to unnecessary taxation.

Other events are unexpected, and even unwanted, yet you need to be prepared against them. Divorce is more prevalent than ever before, and while no-one wants to go into a marriage assuming that it will end prematurely, there is no doubt that some planning in advance can save a lot of trouble later. It can even reduce the tensions which lead to divorce in the first place. Again, taking money out of your own asset base and putting it in trust has proven to be effective, but this also needs to be done in the right way.

There is also a growing movement toward trying to protect assets from court judgments which could be ruinous to the defendant if the verdict goes the wrong way. While professional liability insurance can cover many of these risks, there still exists the frightening possibility that you could be left with a debt so high that the only option will be to declare bankruptcy. Having assets in trust can be a legal protection under certain circumstances, although the money will need to have been transferred long before the possibility of bankruptcy was considered.

Another dimension of asset protection planning can be gained by moving assets abroad, although this is no longer a way of hiding them from scrutiny. There are some jurisdictions such as the Cook Islands where the ownership of a trust can be hidden, but the US Government laws demand full disclosure of all overseas assets. Nevertheless, you still gain a degree of protection by using these financial instruments, and their continued popularity demonstrates that they are still effective. If this is of interest to you, see a lawyer specializing in overseas trusts as part of your asset protection planning.

 

 

 

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