However desirable wealth may be, there is no doubt that increasing affluence not only allows one to take advantage of more of life’s pleasures, but also forces one to deal with more of life’s complications. If you must concern yourself with asset protection strategies and all of the options are giving you a headache, first appreciate the fact that you have significant assets to protect and realize that asset protection strategies work best the sooner they are implemented. Ideal asset protection should include some variety of different strategies, but one commonly effective strategy to consider is that of “splitting up” business property.
Those who own a business that could possibly be subject to outstanding debts or lawsuits should consider opting for a business setup such as a corporation or limited liability company that to a large extent separates their personal identity and possessions from the identity and assets of the company. Where a corporation is established, the personal assets of shareholders cannot be touched if the corporation is sued or liable for a debt except in exceptional situations where the corporate veil is lifted. The establishment of a corporation or a limited liability company is one of the possible asset protection strategies that splits up and creates a distinction between personal identity and business identity.
Due to the fact that a limited liability company can function as a separate identity, bank accounts can be taken out in the name of a limited liability company (LLC). This is often used as a technique in asset protection to separate financial assets that an individual wishes to protect. For example, if an individual could be involved in a lawsuit and wishes to protect funds from a claimant, he or she might consider establishing an offshore LLC and depositing funds in an offshore bank account taken out in the name of that LLC. These funds will be difficult for those filing a lawsuit to trace, and a supposed lack of significant financial resources on the part of the defendant often encourages the claimant to settle for much less money.
Keep in mind, a strategy like the one above needs to be thought of “before” you need it. After a lawsuit has already been filed, any movements like this could be considered fraud, and could land you in prison.
Within a family, there are many possible asset protection strategies that involve splitting up money or business property throughout a group of trustees or family members. One option for a family is the family limited partnership, which involves a financial and legal setup that allows an individual to fully control and enjoy his or her property while being separated from it in a legal context. A creditor or claimant against such a partnership will not have access to all of the assets present, and again the partnership functions as a distinct identity in the same way that a corporation functions as a distinct identity from those of the shareholders. The formation of a trust is another way for a family to ensure the safety of its wealth to its progeny by establishing a legal entity separate from individual family members. However, individuals may also use trusts as an asset protection strategy in several states by setting up a “self-settled asset protection trust”.
Shrewd asset protection strategies involve analyzing a given situation and considering all of the possible legal tools that could potentially allow one to effectively protect one’s assets. There exists a multitude of different legal classifications for funds or businesses- such as the limited liability company, corporation, and family limited partnership- that can separate business property from personal property and decrease the chances that a troublesome lawsuit will take a significant chunk out of one’s assets.