Funny thing about the term “asset protection”…at least one person wearing a robe and sitting on a bench has held that the use of such phrase implies an intent to deny the collection of valid claims held by legitimate creditors.
Now, obviously, nobody wants to cheat their creditors. However, you probably want to pass along as much of your assets to your heirs as possible–that is part of the reason you set up a comprehensive estate plan. You should know that when we talk about estate planning, we are taking into consideration how best to preserve your assets in order to ensure that they are passed down to your loved ones.
One way to avoid being the target of litigation is to do as the author of “Rich Dad, Poor Dad,” Robert Kiyosaki, advised–don’t make it easy for people to see what you own. Yes, you would have to disclose everything you own in a debtor’s examination; the goal is to avoid ever having to endure a debtor’s examination. A good asset protection attorney can help establish and maintain anonymity of ownership in order to avoid becoming a target of litigation simply because it is known that you are a “target-rich environment”--meaning you clearly have a lot of assets to go after.
Another important strategy is to segregate your business assets into separate “baskets,” each usually owned by its own legal entity. A single member limited liability company (LLC) can be disregarded for tax purposes, so there is no need to file a separate tax return for each one–everything flows up to either a parent entity that files a tax return (partnership, S-corp, or C-corp) and then to you and the other owners, or, if you own it 100% yourself, personally, then to you–in which case all profits and losses are included on your personal 1040 tax return, typically using a Schedule C.
Click here for some different scenarios that help illustrate the importance of proper planning.
Call 609-208-0999 or contact us online to set up an appointment to discuss how best to protect your assets.