You may not know it, but you probably already have some asset protection in your life. You probably even have more than one type of protection. Unfortunately, it is still probably not enough to protect you and your family.
What is Asset Protection Planning?
While the many strategies look different, asset protection is meant to protect your assets before someone sues you or threatens to sue you.
- You cannot begin protecting your property from a suit that has already been filed against you. You have to protect your property before there is a chance for a lawsuit.
- The purpose of asset protection planning is to motivate people suing you to settle their claim, increase your leverage in negotiations, increase your options if sued, and hopefully to even prevent suits from being filed.
What Is Traditional Asset Protection Planning, and Why Does It Often Fail?
There are a lot of different ways to traditionally protect your property. Two main methods are described below.
The most common is insurance: home, auto, umbrella, malpractice, etc. Unfortunately, a lot of people view insurance as an easy way to get money, so having insurance could actually incentivize a lawsuit (of course, you should have insurance). Of course, how well insurance works for you depends on whether you have enough insurance, the policies are comprehensive, and your carrier can pay on a claim.
Another way is to use business structures to separate business liability from personal liability. A corporation can protect your personal assets from a suit against the corporation, but it may not work in the other direction. Additionally, your corporation can only protect your personal assets if you administer your corporation well enough so that someone suing you cannot “pierce the corporate veil” and get to your personal assets.
What Should You Do Now?
The prevailing thought is that only rich people need to do asset protection planning. That is not necessarily true. Anyone can be sued for any reason, no matter their wealth. If you believe that you need additional asset protection planning, there are estate planning options to protect you and your property that can be custom-tailored to your situation and goals. Contact The Rains Law Firm or schedule a complimentary initial meeting to see if asset protection planning meets your needs.