Many business and professional people have worked for a long time and accumulated significant assets. They intend to benefit themselves and their families during their working careers and also in retirement.
Sadly, we live in a litigious society and unfortunately; business and professional people have significant exposure to claims from creditors. They are good targets both because of the activities in which they engage and because they have assets.
Fortunately there are legal ways to minimize your exposure and reduce your risk.
The first step in asset protection planning is to do a risk analysis. What are the likely litigation threats to your professional practice or business? How can you minimize those threats? What should you have in place if the threat becomes a reality and results in litigation? Tax and investment objectives must be considered in determining which asset protection strategies to pursue.
Asset Protection Planning with Begley Law Group, PC
At Begley Law Group, we will work with you to evaluate your unique situation and determine which strategies would be most beneficial. There are a number of strategies available to protect assets. Some are quite simple while others are more complex.
The basic first step for asset protection is insurance. Types of insurance to be considered are:
- Auto, Home and Life Insurance
- Malpractice Insurance
- Fire Casualty and Liability Insurance
- Officer’s and Director’s Liability Insurance
- Personal Umbrella Policies
- Business Interruption Insurance
Titling of Assets
Proper titling of assets can be a useful strategy in asset protection planning. Some of those asset-titling strategies are:
- Titling Assets in Name of Spouse
- Tenants by the Entireties
- Transfer to Children
- Titling Assets in Name of Trust
- Homestead Exemption
Generally, there are two types of retirement accounts to be considered: ERISA plans and IRAs.
- ERISA Plans
Assets Used in Profession or Business
There are a number of business entities that provide protection of business assets from claims of creditors. Theses include corporations, LLCs and LLPs. In utilizing these entities, it is often useful to establish separate entities for separate purposes.
- Limited Liability Company (LLC)
- Limited Liability Partnership (LLP)
- Separate Entities
Domestic Assets Protection Trusts
A domestic asset protection trust (DAPT) is an irrevocable trust, that allows the settlor of the trust to be a discretionary beneficiary and yet still protects the trust assets from creditors. Fifteen states have adopted legislation authorizing DAPT including Delaware.
When establishing an off-shore trust, assets must be moved to that jurisdiction to insulate them from creditors. While arguments can be made that off-shore trusts provide advantages unavailable under a DAPT, there are also risks attendant in an off-shore trust.
Divorce often subjects assets of a professional or businessperson to claims of the divorcing spouse. Strategies to consider are:
- Elective Share
- Prenuptial Agreement
- Separate Spousal Assets
- Inherited Assets
- Discretionary Irrevocable Trust
Timing/Fraudulent Transfer Act
Timing is the key to implementation of an effective asset protection planning strategy. Both New Jersey and Pennsylvania follow the Uniform Fraudulent Transfer Act.
Are you a good candidate for Asset Protection Strategies?
- Risk Analysis ― What is the risk that a claim will be brought against you?
- Net Worth ― What is the size of your net worth?
- Implementation ― Have you implemented all of some of the asset protection strategies listed above?
- Willingness to Plan ― Are you willing to engage in all or some of these asset protection strategies?
- Investment Assets ― Do you have significant investment assets outside of your profession or business?
- Control ― Are you willing to give up control of a portion of your investment assets by placing them in a DAPT?
- Fraudulent Transfer Act ― Are you considering implementing these asset protection strategies before a claim has arisen and before an incident has occurred that may give rise to a claim?
- Trustee’s Discretion ― Are you aware that you cannot obtain income and assets from a DAPT simply upon request?