Asset protection
What is asset protection?
First emerged in 1970s, being a stand-alone section of the law, asset protection has become increasingly popular ever since. Term ‘asset protection’ implies that virtually anyone can be exposed to legal claims and trials, risking to lose his/her estate, money or any other value items (assets). Therefore, assets need to be protected.
Why do I need it?
Asset protection is essential if your profession involves high risk and/or you frequently interact with people as a part of your normal job. For example, a surgeon or physician risk being held liable for medical malpractice. You might be aware of medical workers who lost everything after being held liable for medical malpractice in amounts far beyond their malpractice insurance. Same can be attributed to pyrotechnics engineer who also has tremendous occupational exposure.
Another area for asset protection is marital relationships. If the property is jointly owned, you may risk losing half of it in case your marriage is in some way unsuccessful.
To take a broader perspective, even employer may have a risk of being sued by employees. The risk exists regardless of how justified the claims of employees can be.
How does it work?
Asset protection planning involves figuring out and applying a lawful series of techniques that protect your assets from claims of potential plaintiffs. The techniques are designed to deter anyone from going after you, and frustrate them if they do, generally by making it difficult or impossible for future creditors to grab hold of your assets or collect judgments against you.
Asset protection also sets as its goal the concept of removing assets from a debtor's legal ownership, while retaining control and beneficial ownership. Over the year, numerous legal structures have been developed to split up legal title to assets from control and beneficial enjoyment.
Insurance
Insurance is the most common asset protection technique. By "transferring" the risk to an insurance company, you can usually protect your assets. But even if you buy insurance, it might not cover all possible risks that you face, or the amount you buy might not be sufficient, or the insurance company may be able to deny the claim (perhaps it could claim there were misstatements made in your application), or the insurance company may become insolvent. Asset protection planning helps you prepare for these unforeseen risks.
Legal entities
Another way to protect your assets is setting up a series of trusts, partnerships and/or other offshore entities, by doing which you will not own your property in person, but still retain beneficial ownership and control.
Caution
In the business context, there is a very sharp dividing line between "legal" asset protection planning on the one hand, and actions to defraud creditors, which are criminal, on the other. For that reason it is essential to have a law expert guide you through the process.
Freedomland Financial & Consulting Ltd. helps in asset protection planning. Please contact us to know what options are available for you in order to keep your assets protected.
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