Whether you’re looking for a way to protect your assets from creditors or keep your money from being seized, you should know six asset protection strategies. These strategies can help you maintain your financial freedom, so you can continue to enjoy your life without worry.
Tenancy by the Entirety
Tenancy by the entirety is one of the asset protection strategies to shield your wealth where both spouses are working. This type of asset protection is available in some states, though it could be more effective in protecting property.
Tenancy by the entirety requires that the two partners have an equal share of the property. This means the two spouses cannot buy a home or own it jointly. This type of asset protection will protect the home from one partner’s creditors but does not protect it from all claims.
Tenancy by the entirety only protects the property if both partners agree to make the property decisions. For example, the property cannot be sold without the other spouse’s consent. In addition, creditors cannot place a lien on the property. If one spouse dies, the property will pass to the surviving spouse automatically.
When a marriage ends, tenancy by its entirety will devolve into a tenancy in common. In this type of asset protection, the property is still protected by survivorship rights. However, a judge can overturn this protection.
Third-party Spendthrift Trust
Using a spendthrift trust as part of your asset protection strategy can be helpful in many situations. It can prevent courts from recognizing your inheritance as marital property, protect your beneficiaries from creditors, and protect you from the risk of a divorce.
The primary purpose of a spendthrift trust is to protect the beneficiary’s assets. For example, if the beneficiary is an irresponsible spender, a spendthrift clause will limit how much they can spend on a particular item or activity.
Spendthrift clauses are recognized in nearly every state. However, the exact language can be significant. The proper spendthrift clause can prevent creditors from attaching claims against trust property and disenfranchise creditors in bankruptcy.
A spendthrift trust can be revocable or irrevocable. Revocable trusts offer more flexibility for the trustor and creditors, but irrevocable trusts offer excellent protection from probate and taxes.
Spendthrift trusts are typically created by a person who wishes to protect their assets from the irresponsible spending habits of a beneficiary. The beneficiary may be impulsive, have substance abuse issues, or have a poor decision-making history.
Using offshore trusts is a valuable asset protection strategy for individuals with significant assets and a high risk of legal liability. These plans often involve multiple legal entities and can be complicated. They are best used with a professional trustee and a strong business plan.
The trust laws of foreign jurisdictions differ significantly from those of the United States. They offer more asset protection and have more favorable rules for creditors.
When setting up an offshore trust, determining which jurisdiction is best for your needs is the first step. You will want to consult with an attorney who specializes in trust law. Many options are available, including foreign countries, offshore LLCs, and foreign bank accounts. Some countries are safe havens with low rates of return. Others are more volatile, with significant risks.
Using an offshore trust can help you protect your assets from frivolous lawsuits. When the trust deed is drafted correctly, it can shield your funds from creditors and judgments.
A “loser pays” clause in the trust deed can deter frivolous lawsuits. If the court rules against you in your lawsuit, the winning party will have to pay your legal fees.
Creating a sound asset protection strategy for corporations and businesses is essential. The strategy depends on several factors, including the type of business and the assets owned. It is also essential to consider the types of creditors involved.
Personal creditors cannot pursue the assets of a corporation. It is also important to remember that a corporation has limited liability for the principals of the company.
Another critical asset protection strategy is to obtain liability insurance. This will protect your assets against liabilities, including lawsuits. However, obtaining adequate liability insurance requires a comprehensive assessment of your potential litigation exposure.
Another asset protection strategy is to create separate legal entities to protect your assets. These legal entities will ensure that your liabilities and assets are separate. You can use a limited liability company (LLC) to protect your assets. The LLCS can be more flexible and affordable than a corporation.
A holding LLC can also be used to protect your assets. The LLCS should be formed in the state where you want to establish the holding company. It must be formed under the Revised Uniform Limited Partnership Act, which prevents liquidating a business interest.
Limited Liability Companies
Getting started with a Limited Liability Company (LLC) can be an excellent asset protection strategy. They are relatively inexpensive to start and offer flexible management and tax reporting. However, there are some limitations. Creating an LLC is not a one-size-fits-all solution; you should consult an attorney before forming.
One of the main benefits of forming an LLC is that your assets can be protected from business creditors. You can keep your savings, investments, and assets safe from business creditors.
An LLC can also protect you from the threat of a lawsuit. A suit against you can take your assets away. Fortunately, you can employ many asset protection strategies to keep your savings safe. However, it would help if you were strategic in your planning. It would help if you decided which of these strategies will be most effective for your business.
Having a good liability insurance policy can protect your business assets. However, it would help if you also kept your finances separate from the business. This can include forming an LLC and keeping the records separate. You can also deposit your business income into a separate business account.