Asset protection should have crossed your mind if you have something to protect. It is not about asset protection only. It is also about ensuring you do not end up in jail due to contempt or bankruptcy fraud. Here are some of the things you should consider for asset protection planning.
Plan before a claim arises
You can do a lot of things to achieve asset protection before a claim or liability arises. But there are only a few after it arises. What you do after a claim rises could be usually undone by the fraudulent transfer law.
Late planning backfires
Planning for asset protection after a claim arises is like getting a flu shot when you already have the flu. Late planning will make matters worse. The debtor is liable for the creditor’s attorney fees. So is whoever helped in the fraudulent transfer. The debtor is usually not discharged from bankruptcy when this happens.
It is not a substitute for insurance
Asset protection planning supplements liability and professional insurance. It should not be a substitute. Insurance also supplements asset protection planning. A debtor can survive a claim of fraudulent transfer with insurance. The insurance company will pay to defend it and to settle it since you pay for the premiums.
Personal Assets: Trusts; Business Assets: Business
Corporations, partnerships, and LLCs are business entities. They are vehicles for commercial operations. A creditor may pierce a business entity if you place a personal asset in it. Personal assets are usually placed in trust. Trust assets are often protected by a long and solid body of law.
Too much control
There should be a balance between giving the client enough control. It should be enough that the assets do not disappear. But also enough that a creditor cannot argue on alter ego or similar theory. This theory argues that the debtor and the asset protection structure are one and the same.
Tax and estate planning
There are times when asset protection planning goes well with estate planning. There are also times when they are at odds. The making of gifts to children and prospective heirs is common in estate planning. But it is not so in asset protection planning. Gifts are often set aside as fraudulent transfers.
The court can demand you to bring your offshore money back to the United States. Repatriation order is the legal term for this. If the debtor failed to comply, a bench warrant is usually issued. You will be in jail until the money comes back.
Bankruptcy used to allow a debtor to wash all debts away while retaining a good amount of assets. The bankruptcy law changed to bare the bones and flesh of the debtors. Bankruptcy judges often have the strongest powers to make debtors cough up assets.
The simpler the better
Complicated asset protection plans are difficult to explain. The court will be suspicious if you fail to explain how you came to have those assets. Or how the transfer happened. It is a grounds to begin disregarding entities or setting aside transfers. A simple plan is usually the best plan. One example is an irrevocable trust fund created and funded for the benefit of your children.
Creditors know everything
Creditors usually know about the entirety of the planning and its purpose. Failure to make a full disclosure will lead to a denial of discharge. It can also amount to charges of perjury and bankruptcy fraud.
For more information, you can contact asset protection weymouth lawyers. They practice in many legal areas. This includes family law, personal injury, estate planning, and bankruptcy amongst others.