The Top 5 Asset Protection Tips
- Set Up an Asset Protection Plan as Early as Possible People often look to protect assets after a legal claim arises. Whereas there are ways to protect assets after being served with a lawsuit, the courts look most favorably on those who have set up their asset protection plans well in advance of a claim.
- Divide and Conquer For domestic tangible assets, setting up multiple entities for different segments of your enterprise can erect protective firewalls between them. If you have 10 rental properties, a construction company, a restaurant, a Subway Sandwich franchise and a gas station all owned by one company, that’s a recipe for disaster. A lawsuit in any one of the businesses can expose the assets of all. Hold the rental properties in one or more limited liability companies, depending on the amount of equity in each. The other businesses should be held in separate corporations or LLCs. The stock or membership in the companies can be held in a precisely drafted Nevada asset protection trust and/or LLLP, for example.
- Think Offshore Judges often rule by gut feeling rather than the law. So, overzealous justices often ignore domestic asset protection plans. For liquid assets, using a powerful tool such as an offshore asset protection trust fits the bill. Placing the funds held therein in a safe international financial institution puts assets outside of the local court’s reach. Of the top 50 safest banks, rated by Global Finance, only five are located in the US. The safest US bank is only 25th on this list as of this writing. So, there are banks overseas that are much safer than US banks.
- Don’t Count on Bankruptcy In the year 2005, bankruptcy laws went through a major overhaul. For example, a high percentage of Chapter 7 filers are now forced into Chapter 13 and a multi-year debt repayment plan. In addition, unlike before, one is required to meet with a credit counselor six months before filing bankruptcy and must attend money management classes that the debtor must pay for. Homestead exemptions have been reduced to no more than $125,000 of home equity regardless of the state, including Florida, Texas and Kansas which previously has 100% homestead protection in bankruptcy.
- Don’t be Flashy Driving a Ferrari, placing pictures of your lavish vacations on Facebook and boasting about your latest business triumph may inject your ego with adrenaline, but it also puts a target on your back. The, “He makes a lot of money so I should have some of it,” crowd is attracted like a moth to the light above your built-in barbecue. Use a little discretion. At least you could buy a black Ferrari instead of a red one.