The need for protecting your property, personal and professional, from potential litigants and creditors, is gradually catching up with people. You may come across different plans for asset protection. Just choosing any of these would not be capable of giving you adequate protection. You need careful consideration and guidance from a legal expert.
Many have misconceptions in this regard. Some think it illegal and unethical. Some think it useless. Some think that all it needs is to transfer your assets to your spouse. If you think the same, think again. This planning is neither illegal nor unethical, and effective, if you utilize legal assistance.
Note: Transferring your assets to your relation or to an offshore account can be interpreted as a fraudulent way to cheat your creditors/litigants. Be sure to get legal help, or you risk being labeled as a fraud.
Before you go ahead and discuss the details of your plan with a lawyer, here are the popular tools in use to keep your assets out of harms way.
Asset Protection Trust of irrevocable nature can be a good way to protect your assets. The arrangement is something like this you choose the trustee and the beneficiaries, and then transfer the property to the trust. The trustee has the responsibility to manage the assets and divide the profits among the beneficiaries. You can remain as a beneficiary, and get a share of profits, to such a trust as well.
Limited Liability Company (LLC) is a business structure that offers another suitable way to keep your assets safe. The owners, or members, of a LLC have limited liability for the actions of the business. However, you need to know about your states specific requirements regarding these businesses. Understanding how taxation affects your business structure is also necessary.
Family Limited Partnership provides asset protection to the limited partners only. In this structure, usually the members of a family pool in their property. The general partners have the control of the trust while the limited partners have no such powers. Therefore, the general partners have greater liability for actions/debts of the business. An advantage is that it is more flexible in nature than the aforementioned ones.
Planning to protect your property from potential creditors/litigants involves federal and state laws. Different domains of the law pertaining to estate planning, taxation, inheritance, and so on are involved in the process. This is why you need advice from a legal professional with expertise in this field.
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