In general terms, asset protection planning involves organizing a person’s assets and liabilities and developing strategies to protect them from each other. Some forms of asset protection seek to shelter assets from excessive taxation, while others focus on creating barriers between creditors and assets.
Depending on the specifics of your assets and liabilities or potential liabilities, you may have a number of ways you can protect your assets, but the key to this possibility is forward-thinking planning. Attempting to execute asset protection strategies while creditors simultaneously pursue your assets may cause serious complications.
A very basic example of asset protection might include using some form of trust to remove assets from your personal possession so that creditors cannot pursue them for repayment of your debts. While this may prove effective and minimize your personal risk, establishing a trust and attempting to fund it with assets a creditor is already pursuing is often not allowed.
In contrast, if you anticipate debt collection as a part of some future venture and choose to protect your assets ahead of time, you stand a much better chance of seeing your strategies succeed. You may even find that you have many more opportunities than you expect, and may even identify threats you did not see beforehand.
The efficacy of asset protection planning depends on foresight. If you believe that asset protection planning is useful to your financial goals, it is usually wise to begin building and implementing your plan as soon as possible. Be sure to speak with an experienced estate planning attorney who understands how to maximize your benefits and protections.
Source: Findlaw, “Asset Protection Planning,” accessed Nov. 30, 2017