For many Americans, it is almost inevitable to incur some debt. When you have debts, you have creditors who will protect their own interests by doing their very best to collect. This is why asset protection exists, to give debtors a chance to keep their assets without conflicting with the law.
Asset protection pertains to the concept of keeping your assets and using strategies to do so. It is a legal way to put your assets away from creditor claims. There are some rules, however, that govern asset protection. Even if you “think” you’ve done it right doesn’t make it so. Judges can still rule in favor of a creditor if you violated the law, or if the judge believes you are intending to because of all the confusion, and your “protections” will unravel.
Remember these pointers when protecting your assets:
Get a Lawyer
An asset protection attorney will brief you on the strategies you are allowed to use to keep your assets under guard. They will also inform you if what you are thinking of doing is illegal. Remember, it is not the intention but the deed that is easy to judge. You can be charged with fraud or held in contempt if you violate the law, so choose your lawyer wisely. A shady reputation is not exactly a good basis for choosing one.
Don’t Race a Creditor
Before there is even the possibility of a claim or liability, your assets should already be under lock and key. Don’t race applying for asset protection if you know a claim is coming. This is easy for a judge to undo under suspicion of a “fraudulent transfer,” so your asset protection is useless. In fact, it can make matters worse for you, your lawyer, or whoever set it up.
Understand Your Protections
The simplest trusts are the best kind there is. An irrevocable trust for your children, for example, is easy to understand and explain, so it is mostly safe. If you have an asset protection plan that’s so complicated you don’t even understand it yourself, how will you explain it to a judge? And do you know of any judge who will rule in your favor if you try their patience?
The laws that apply to debtor-creditor cases are supposed to safeguard both parties, for as long as those parties do their part to stay fair and honest. Don’t try to defraud the system; that’s almost a free ticket to jail.
