Asset Protection Planning

Asset Protection Planning

Asset Protection Planning is a method used to shield assets that would otherwise be susceptible to legal judgments or claims by creditors or former spouses. A number of legal devices exist to ensure that both personal and business assets remain in the possession of the asset-owner. Individuals and businesses use asset protection to diminish creditors’ access to valuable property while ensuring the property owner does not violate the law.

Some assets are considered “exempt” under state and federal law and therefore cannot be reached by creditors. Exempt assets include personal property, such as household furniture, clothing, or jewelry, and tools of a trade or business. In some states, such as Florida, an individual’s primary residence, life insurance benefits, and annuities are considered exempt.  Each state has laws shielding owners of Limited Liability Partnerships, Limited Liability Companies, and Corporations from liability. Additionally, federal law exempts qualified retirement plans governed by the Employment Retirement Income Security Act (ERISA). Qualified retirement plans include pension plans, employee stock ownership plans, profit sharing, and 401(k) plans. Assets to which one does not hold legal title are generally unreachable by creditors.

The process of asset protection involves assessing a client’s particular situation and identifying future goals, designing a strategy to accomplish these goals, and preparing the required legal documents to carry out this strategy. Common forms of asset protection include Business Succession Planning, Nuptial Agreements, Family Limited Partnerships, Limited Liability Companies, and Trust creation.