Asset protection strategies involve protecting money and property from creditors, taxes, and lawsuits. Strategies include retirement plans, trusts, and business entities. Lawyers use a combination of methods to protect clients’ income, and strategies vary depending on jurisdiction. Retirement plans, trusts, and business entities can be used as effective tools in asset protection strategies.
Asset protection strategies are methods of protecting money and various types of property from creditors, taxes, and lawsuits. Different strategies include creating retirement plans, trusts, and business entities. Lawyers and other professionals who specialize in estate planning, tax law, and asset protection strategies use a combination of methods to help clients protect their income. Asset protection strategies vary depending on the laws of each jurisdiction.
Lawyers who develop asset protection strategies sometimes use retirement plans to protect assets. In the US, for example, the law protects specific types of retirement plans from lawsuits, which means that a court cannot force a person to withdraw money from a retirement plan to pay a judgment. Plans that may qualify are IRAs or pension plans and 401(k) plans. These plans are often available through the client’s employer. An employee pays a certain percentage of her salary into a plan that earns interest, and her employer often matches the contribution.
Asset protection strategies often include trust instruments. A trust is a legal entity that holds assets for the benefit of one or more people called beneficiaries. A person called a settlor places her assets in a trust with specific instructions for a trustee. A trustee is an individual, bank or company that manages the money deposited in the trust. An administrator must manage the assets in accordance with the instructions of the settlor.
Only certain types of trusted instruments can function as effective tools in asset protection strategies. For example, in an irrevocable trust, the law prohibits anyone from withdrawing the assets held in the trust. This means that a court cannot order the settlor or trustee to turn over the assets to pay a judgment. There are several types of trust instruments, and each works differently depending on the jurisdiction. Therefore, it is important to consult with an attorney experienced in asset protection strategies and trust instruments.
Asset protection strategies may also involve a business entity such as a corporation, limited partnership, or limited liability company (LLC) to protect assets. A structure like an LLC allows someone to conduct a business while protecting their personal assets from liability. Of course, another person or company can sue a business entity and get a judgment against that entity. LLC members or corporate officers, however, are generally not responsible for paying a judgment personally. The law can reach the personal assets of owners only in very limited and rare circumstances.
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