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What Is Asset Protection & Why Is It Important?

What Is Asset Protection & Why Is It Important?

Considering the fact that you have worked hard to earn your assets, you're going to want to employ certain strategies that will shield them from foreseeable and unforeseeable problems such as creditors' claims and lawsuits.

Asset protection simply refers to a set of legal techniques that deal with protecting the assets of individuals and entities from civil money judgments. The ultimate goal of asset protection planning is to insulate one's assets from creditors' claims and other lawsuits without concealment or tax evasion.

When you engage in asset protection planning, you are essentially guarding your wealth. Both individuals and entities use asset protection techniques with the goal of limiting a creditors' access to valuable assets; however, these techniques are all utilized within the bounds of debtor-creditor law.

No one ever heard of a $10 million dollar lawsuit being filed against a homeless man or an unemployed person because it would be pointless. Lawsuits are filed against individuals with "deep pockets," and in this litigious society, such lawsuits are sometimes entirely frivolous. Even still, it is surprising how some plaintiffs manage to obtain large jury verdicts for seemingly minor injuries or other minimal damages. In many cases, a large jury verdict can cause devastating financial losses for an individual or corporation who lost in a civil lawsuit.

Certain people and companies are a prime target for lawsuits. This is especially the case for high-net worth individuals worth over $1 million, doctors, obstetricians, real estate investors, dentists, CPAs, attorneys, and others who hold professional licenses. Those who are also coming into a windfall by due to an inheritance, a big sports or entertainment contract, or the sale of a business are also at risk.

Asset protection helps insulate assets, without engaging in any illegal practices such as concealment, tax evasion, bankruptcy fraud, or fraudulent transfer. In order for asset protection to be successful, it's important that it is done before a claim or liability arises because whatever you do after a claim arises can be undone by "fraudulent transfer" law.

The goal of asset protection planning is to reach a balance where the client has enough control that their assets don't disappear, but at the same time not so much control that a creditor could argue that the structure should be disregarded by a court.

Whether you obtained your wealth through years of hard work or you have come into a windfall for one reason or another, wealth and success are life-changing experiences that can improve the quality of your life and the lives of the ones you love. Whether you are likely to get sued because of the nature of your work or because of your wealth status, those with more assets are naturally bigger targets for lawsuits and that cannot be ignored.

Don't let your wealth get stripped away from you. Protecting your assets sooner than later will allow you to sleep easier knowing that they are well-shielded.

To learn more about asset protection planning and how it will help you, contact a Long Island estate planning attorney from The Law Office of Michael J. Brescia, P.C. We can be reached at (631) 386-8767.

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