{"id":4061,"date":"2019-09-01T22:10:00","date_gmt":"2019-09-01T22:10:00","guid":{"rendered":"https:\/\/fusionwm.com\/?p=4061"},"modified":"2022-10-12T22:16:49","modified_gmt":"2022-10-12T22:16:49","slug":"can-asset-protection-strategies-help-shield-your-wealth","status":"publish","type":"post","link":"https:\/\/fusionwm.com\/can-asset-protection-strategies-help-shield-your-wealth\/","title":{"rendered":"Can Asset Protection Strategies Help Shield Your Wealth?"},"content":{"rendered":"\n
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If you\u2019re a high-income professional or entrepreneur\u2014or if you simply have a substantial net worth\u2014you probably realize that in today\u2019s litigious culture, you\u2019re an attractive target for unfounded or frivolous lawsuits.<\/p>\n\n\n\n

But what have you done to actually reduce the risk of losing your wealth if you get sued? In our experience, far too many affluent individuals and families don\u2019t act to protect their assets, livelihoods and lifestyles.<\/p>\n\n\n\n

The good news: There are many strategies that can help safeguard your wealth against those who would unjustly seek to take it. Here\u2019s a look at the world of asset protection planning and how you might be able to leverage it to your advantage.<\/p>\n\n\n\n

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The aim of asset protection planning<\/h1>\n\n\n\n

For starters, it\u2019s helpful to know that there\u2019s no formal body of law called asset protection planning. Instead, it\u2019s a series of strategies and tools that are part of the category known as legal risk planning\u2014which itself falls under the broader umbrella of risk management (see Exhibit 1).<\/p>\n\n\n

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Despite being a smorgasbord <\/em>of strategies, asset protection planning focuses on realizing two main outcomes:<\/p>\n\n\n\n

  1. Discourage and deter a possible lawsuit before<\/em> it even begins.<\/strong> If possible, you want to eliminate or mitigate possible litigation in the first place. The most potent asset protection plans we\u2019ve seen are never even contested. Litigation is avoided or everything is settled before there are any judgments.<\/li><\/ol>\n\n\n\n
    1. Motivate creditors to agree to a settlement that\u2019s favorable to you.<\/strong> If a lawsuit does move forward, you want to minimize any loss of wealth. When there are judgments, for example, a powerful plan can make it extremely challenging for a creditor to collect the money from you should the creditor win in court. If a creditor is highly uncertain about the ability to collect, the odds of a settlement that\u2019s favorable to you can rise significantly. Add in the time involved dealing with the courts and attorneys\u2014and the associated financial costs\u2014and you can see how smart asset protection planning motivates a creditor to settle, or perhaps even walk away with nothing.<\/li><\/ol>\n\n\n\n
      First steps<\/strong>\u00a0As valuable as asset protection planning can be, it probably should not be your first line of defense for safeguarding assets. Before taking steps to legally insulate your wealth, consider options such as:\u00a0

      – Increasing your personal umbrella policy to (if possible) equal or exceed your net worth. This is usually a highly effective and relatively inexpensive risk management solution.

      – Getting high-quality business liability insurance if you are an entrepreneur.\u00a0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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      Tips for effective asset protection planning<\/h1>\n\n\n\n

      True asset protection planning doesn\u2019t seek to \u201chide\u201d wealth. It should be done transparently and out in the open in order to be effective. The fact is, you want <\/em>creditors (or anyone else who might try to take your assets) to clearly see what you have done. If they can easily grasp how difficult a legal path they\u2019ll likely have to take to get to your wealth, they may be much more motivated to settle for anything they can get.<\/p>\n\n\n\n

      Watch out:<\/strong> Some so-called asset protection strategies are promoted with the idea of secrecy. These strategies aren\u2019t true asset protection solutions\u2014they\u2019re probably more akin to offshore tax evasion strategies that could land you in serious trouble with the IRS.<\/p>\n\n\n\n

      You also may need to adequately justify to governmental authorities, a judge or a jury any asset protection planning actions you take in order for your strategies to be effective. That can be tricky. For example, except in bankruptcy cases, the law is generally not very accommodating of the idea of insulating assets from legitimate creditors. However, doing asset protection planning because you want to pass wealth to your heirs is often seen as a viable explanation by the powers that be.<\/p>\n\n\n\n

      Another vital step: Implement these strategies before you need them\u2014or even think you may need them. Put a plan in place after trouble arises (or even shortly before a lawsuit that seems imminent) with the intent of dodging creditors, and you might find your strategy negated by a judge. Worse, you potentially could be charged with contempt, fraud or civil conspiracy for engaging in \u201cfraudulent conveyance.\u201d<\/p>\n\n\n\n

      Note:<\/strong> Because evidence of intent is nearly impossible to prove, judges typically look for badges of fraud<\/em>, such as:<\/p>\n\n\n\n