Big Brother knows all. Thanks to technological advancements, he may be aware of the many ways you’ve attempted to keep your assets safe, protected or hidden. If you’ve been wondering how to protect your assets and haven’t done so yet, consider some of the tools mentioned here. Then use them to protect yourself, your family and your future.
It’s not just the rich and famous who need asset protection. It’s all of us. We’ve worked hard all of our lives to ensure we have a safe and secure financial future. Then suddenly something unforeseen happens. There are many reasons why your assets could be attached or garnished. Let’s say you need to file for bankruptcy or divorce or are in a civil lawsuit. Say you are in anything that results in judgment proceedings against you. It may not even be your fault, such as your teenager getting in a car accident; someone falling in you yard and suing in excess of your insurance coverage. In all of these events, it’s likely the affected party will go after your assets.
Asset protection shouldn’t be an afterthought or a stop-gap measure. Creating an asset protection trust after a creditor contacts you, you’re served with a lawsuit, or an auto insurer sues you may protect you. But it is not looked upon as kindly by the courts if you had set it up well beforehand. Asset transfers and retirement contributions should be taken care of long before trouble arises. Protecting your money is more about putting assets into the right legal tools that protect your money even if your creditor finds out about it, and less about hiding assets.
Asset Protection Tools
Run each of your business in separate corporations. The corporation protects you from being sued if your business is subject to litigation. Having separate corporations protects each business unit from a lawsuit against the other. Keep investments in LLC for asset protection and the ideal tax treatment. If any asset is dangerous (one that could subject you to lawsuits), such as a rental house, keep it in a separate LLC than your other rental properties – one LLC per property. Safe assets such as stock market investments and cash accounts can all go into the same LLC. For substantial liquid assets, shelter them in an asset protection trust, preferably a Cook Islands trust. The Cook Islands trust will own an offshore LLC that holds the bank and investment accounts.
Free Asset Protection Privacy Tips
Wyoming Personal Name Corporation. In Wyoming, we can form a company with a name that is the same as yours, without adding the word “Incorporated,” “Corporation,” or “Limited” at the end. So, if your name is Pat Smith, we can name the corporation Pat Smith, if that name has not already been taken in Wyoming. You can open a bank account and put your checks into this company.
New Mexico LLC – A Horse with No Name. In New Mexico you don’t have to file a list of managers. Ever. So no person needs to be listed in the public records. Who owns it? Who knows? Who runs it? Your guess is as good as mine.
Offshore LLC. It gets even better in Nevis. No person’s name is filed in the public records. No owner. No manager. No officer. No director. Plus, they don’t have a website where you can find out if a company even exists.
What are the Asset Protection Laws?
There are federal and state laws that determine what type of legal protection you have from creditors and judgments. LLC statutes in almost every state have decent asset protection provisions for assets held in such an entity. Some states have tenancy by the entireties laws where if one spouse is sued, the assets held in this fashion can be protected. Some states have generous homestead exemption statutes that protect a personal residence from seizure. But the strongest laws by far are those of foreign asset protection jurisdictions such as the Cook Islands or Nevis. These jurisdictions don’t have much in the way of natural resources but they more than make up for it by having strong financial services sectors that protect assets from your not so friendly neighborhood lawyer.
Asset Protection Trusts
Trusts may be one of the safest and most powerful legal devices available to protect your money. This involves completely transferring all assets to a trust overseen by an independent trustee who acts in the best interest of the beneficiary. In an irrevocable trust, you no longer own the assets, the trust does. So when you get sued, there is nothing to take.
One concern is that when a trust is set up correctly, it can be so well-protected that sometimes even you can’t get into it when a judge orders you to turn over the assets inside. The good news is that if you can’t get to it, well, neither can your creditor. You still can have access to your money but it is protected from being taken by others. Assets inside of an irrevocable trust can be enjoyed by you and or your beneficiaries. It can also be used to shield assets for your children’s current and future use.
States including Alaska, Delaware, Rhode Island, Nevada and South Dakota now allow asset-protection trusts. But their asset protection power is no match to offshore trusts in remote places like the Cook Islands and the Caribbean. Having a trustee who resides outside the reaches of local courts pack a powerful punch to your enemies at law. With several thousand trusts established, this organization has never seen funds seized from a properly structured Cook Islands trust.
Transferring Assets to Others Usually Doesn’t Work
Some think investing money in their businesses can protect their assets from liability lawsuits and creditors? If their company runs into a problem, their personal assets might be at risk. If they own the business, they may be able to borrow against account receivables and put the money into an asset protection tool, such as an asset protection trust, making otherwise reachable assets unreachable by creditors.
You may have considered transferring ownership of your assets to another person. In this way, you may rationalize that since you no longer own the assets it’s harder for someone to come after your money. However, fraudulent conveyance (aka fraudulent transfer) laws trump this approach. Moving money to another person often subjects them to lawsuits to get the money back from them that you transferred to keep away from creditors. Subjecting your son, daughter or parents to a lawsuit doesn’t bode well at the Thanksgiving table.
Likewise, spending down your assets or signing your home over to a relative in order to qualify for Medicaid, Medicare, college or residency, can be considered fraudulent if clearly done simply to qualify. Plus there are significant time requirements in that most of this must be done well in advance of the need.
Will a Limited Liability Company Help?
Yes! Creating one or more limited partnerships (LPs) or limited liability companies (LLCs) is method for integrating assets and the business into an asset protection plan. An LLC is a legal entity that provides limited liability to its owners. The owners of an LLC are protected much like a corporation but cannot be held liable for debts unless a personal guarantee was signed.
Step it up a notch, LLC’s formed on the Caribbean island of Nevis provide all the protection the United States does for an LLC with the added advantage that Nevis is an offshore asset protection jurisdiction. This means it’s very difficult for a disgruntled party to successfully win a judgment there when you hold assets inside of a Nevis LLC.
Asset Protection in Retirement Accounts
It’s a known fact that if you don’t have access to your money, neither does the courts, and neither will creditors. Whether individual or company-sponsored, a retirement account can keep your money safe and also earn positive tax advantages depends on your state law. And, your employer-sponsored retirement account might also have protection from bankruptcy and creditors, though not always, so check your state exemptions.
Contributions and earnings in your traditional IRA’s and Roth IRA’s have an inflation-adjusted protection cap of $1 million from bankruptcy proceedings under federal law. But each state varies. Amounts rolled over from qualified plans have some protection but in some cases, protection only applies to bankruptcy and not to other judgments, depending on the state.
Regarding college financing, retirement assets are not counted in the calculation of the expected family contribution (EFC). But all assets that aren’t in retirement accounts will be counted. This includes checking and savings accounts, CD’s, money market, real estate investments, stocks, bonds, mutual funds. Everything is counted in determining what the student and family’s share of cost will be.
Ideas, Patents, and Trademarks are Assets
Protecting intellectual property (IP) that you think is worth millions of dollars is as easy as keeping your idea a secret. However, if someone comes along and ‘steals’ your idea can you prove you had the idea first? Did you do all you could to protect the idea? Did you file a patent? If not, then that idea can become someone else’s. Protect your trade secrets from technology by avoiding copying, printing, faxing, emailing or sharing them in written form with anyone.
Consider hiring a competent patent attorney to write and file the patent application. If your patent is infringed upon, take immediate action; suing someone a decade after infringing on your patent won’t win you points in court.
Patents are designed to protect the little guy but they can be quite expensive to fight with the median cost of a patent litigation running about $5.5 million dollars.
Then once you do patent your idea, consider holding it inside of an asset protection device such as an LLC or trust.
What Else Can I Do?
- Increase your liability insurance. Your personal umbrella liability coverage should be equal to your current or new net worth. For example, if you are going to receive money from an estate, you’ll want an umbrella policy for the amount of your new net worth.
- Pay down your mortgage early by considering a 15-year mortgage or making twice-monthly mortgage payments to protect your vulnerable cash.
- Talk with an expert who knows how to protect your assets and who can inform you of your options so that you don’t run the risk of losing your nest egg. You can use the phone numbers and contact form on this page.
- Review all of your joint accounts as all money in a joint account is at risk. If the joint owner encounters legal trouble, the entire account could be wiped out.
How Can I Secure my Home or Business?
Protect your home and business networks by employing these safety steps. Protect yourself from someone damaging your files, retrieving your personal information or using your account to download virus software.
- Never share passwords.
- Use a 2-step login process known only to you.
- Restrict remote access. Limit sharing to users who need specific access.
- Don’t click any link you can’t verify.
- Don’t open attachments from unknown sources.
- Don’t download unfamiliar software from the Internet.
- Use encryption whenever available: i.e., ensure your site has security with SSL and TLS certificates.
- Remove unnecessary programs.
- Protect sensitive data: i.e., don’t store your passwords on your computer.
- Log off and shut down all computers when not in use.
Protect yourself in the short-term and in the long-run with any of these asset protection and privacy tools to ensure that your financial future is safe from creditors and predators.
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Jules Marie, Business Owner, Writer, Journalist