There is an increasing interest in asset protection among both individuals and businesses. But many people are still not exactly sure what "asset protection planning" is.
Asset protection planning is simply the process of lawfully protecting your personal and/or business assets from creditors. It involves taking advantage of laws and legal doctrines that were actually designed to help you protect your assets.
"Asset protection" sometimes has a bad connotation due in part to illegal offshore tax haven schemes and other questionable planning techniques. Many asset protection strategies, however, are ethical and highly advisable. An analogy can be drawn to tax planning. Some schemes that are called "tax planning" are nothing more than illegal and fraudulent evasions of taxes. Legitimate tax planning, however, is essential for both businesses and individuals. Similarly, legitimate asset protection planning is important for businesses and individuals, especially in our litigious society.
Asset protection planning makes use of laws that were designed to enable organizations and individuals to protect their assets. There are numerous asset protection alternatives for individuals, including maximizing contributions to IRA’s and qualified retirement plans; using various forms of trusts (including domestic asset protection trusts, irrevocable life insurance trusts, dynasty trusts, and qualified personal residence trusts); retitling various assets; utilizing limited liability companies to protect real estate and other investments; and using life insurance in certain instances. There are also a variety of strategies for lawfully protecting assets of your business, including using separate entities for certain business functions; using limited liability companies; using insurance as protection; and various other strategies. There are many alternatives that are perfectly lawful and appropriate. Fraudulent conveyance statutes and other laws are designed to prevent abuses, but there are a wide variety of asset protection strategies that can generally be employed to protect your personal and/or business assets. For a more in-depth discussion of asset protection strategies that might be appropriate for you or your business, you can refer to an article I wrote recently that outlines some of the options.
Current economic conditions, recent high profile business failures, the recent waive of foreclosures, rising bankruptcy filings, and the seemingly endless number of lawsuits filed in the United States each year all illustrate the need for reasonable asset protection strategies. In this environment, businesses and individuals should have no hesitation whatsoever in taking steps to lawfully protect their assets.