What is asset protection? In simpler terms, it is a form of financial planning that enables you to legally safeguard your wealth or assets. Both businesses and individuals need to protect their assets within the bounds of the law. This limits the access that creditors can have to your personal assets when making a claim.
Read on to learn more about why asset protection matters.
Why Is Asset Protection So Important?
Asset protection enables you, the debtor, to protect your assets in the event of claims or liabilities made against you. It’s done in accordance with state laws in order to avoid illegal practices such tax evasion, or fraudulent transfers. Keep in mind that different states have different debtor-creditor laws if your assets aren’t protected.
In the event you are being sued, your assets can be attached in order to satisfy any judgment against you. This means, under certain circumstances, you could risk losing your home, family heirlooms, and anything else important to you. Having a good understanding of Florida asset protection can help you better protect your assets.
How Can I Protect My Assets?
There are various ways you can protect your assets and various strategies available that can be used. It’s especially important for business owners to protect the individual as opposed to corporate assets, ahead of time. If a lawsuit is filed against you and your individual assets are not properly titled you run the risk of losing them to creditor claims even if it is a business-related lawsuit.
Below are a few examples of different strategies for asset protection:
- Separation of Assets
This can apply in familial situations. Some believe it is better to keep assets separate before and during the course of marriage and/or a relationship. If one partner leaves, the division of assets may not be equitable in terms of contribution. This even applies to separating personal assets from the business.
Independent Business Entities
It’s important to have an independent business entity that separates your business assets from your personal assets. This will ensure that personal assets are protected if the business is faced with a lawsuit or claim.
- Land Trusts
Choosing a land trust ensures that an entity takes ownership or authority over a property. This means that the property itself can be kept out of probate and in some circumstances ensure that true ownership of the property is kept anonymous.
There are two different types of land trusts such as the conservation land trust (which is to protect wildlife and/or historical sites) as well as a title-holding land trust (which allows the owner to main property rights & control anonymously).
- Ladybird or Quitclaim Deeds
With a ladybird deed (also known as an enhanced life estate deed), the person who owns the property (the grantor) transfers the property to themselves. Even if the property will later be bequeathed to someone else (the grantee), the grantor will have complete control over the property until their death. This enables the grantor to do what they’d like to with the property during their lifetime and upon their death, the property goes to whomever they designate without the need for probate.
- Joint Tenancy by the Entirety
Joint tenancy by entirety or tenancy by entirety (TBE) is a special type of joint ownership reserved for married couples so that each has an equal interest in the property, as well as providing additional benefits such as survivorship rights. This isn’t a means to split the property 50/50 but instead gives each spouse full ownership of the property.
This means that without consent from the other spouse, an individual can’t sell or mortgage the property in question. Creditors also cannot attach or enforce judgment against the property if only one spouse has debts that need to be paid.
This also means that in the event of one spouse’s death, the surviving spouse becomes the sole owner of the property without the need for any probate proceeding. Keep in mind that this only applies to relationships where the partners are married to one another – it does not include any other form of relationship, platonic or otherwise.
Consulting With An Asset Protection Attorney
At Handin Law, we offer professional legal services in the areas of business law, real estate, and estate planning. Contact us at (954) 796-9600 to protect your assets today.