Financial strain and even ruin is not something that only happens to the unlucky. In fact, a recent Careerbuilder.com survey estimated that about eight out of 10 workers live paycheck to paycheck – just an accident or a medical crisis away from financial catastrophe. When you are unfortunate enough to find yourself in a serious fiscal bind, it can be hard to know what your options are to protect the things you’ve worked hard to earn. This is where asset protection comes in. Asset protection planning is an area of financial planning that works to legally harbor your assets from creditors during a time of financial crisis. Learn more about how asset protection planning works and how it can help you.
How Does Asset Protection Planning Work
Asset protection planning works within the confines of a legal debtor-creditor relationship to help protect assets. Prior to the establishment of this legal field, many people in a financial bind would resort to illegal practices such as tax evasion, fraudulent transfer or outright fraud to protect such assets as real estate, personal property or funds. Instead, asset protection planning offers legal remedies to help you keep your most valued belongings in your control. Common asset protection tools include:
- Trusts
- accounts-receivable financing
- Family limited partnerships
Asset protection planning is completely legal, but it can be tricky to know what tools best fit your circumstances, so it’s a good idea to consult with an estate attorney if you are looking to protect assets.
Who Needs Asset Protection
Whether or not you need asset protection planning typically comes down to two factors – risk and value. Your assets’ value is their dollar worth minus what you owe. Your risk, on the other hand, refers to the level of exposure your assets have to being seized in a creditor lawsuit. Risk can involve anything from the type of business you are in to the car you drive – and what level of protection related assets would be subject to in a legal proceeding. Carefully balancing the implications of how much risk you are exposed to, how much you would stand to lose in a creditor lawsuit and determining the right course of protective action is the top goal of asset protection planning.
You’ve worked hard for your assets. A financial crisis shouldn’t make them all vulnerable, nor does it have to. Talk to an estate attorney today to learn how the right asset protection planning can ensure your future is secure.