People generally expect to retain ownership and control over their property indefinitely. They want to retain their resources until they retire, sell those assets or decide to gift them to other people. Unfortunately, personal resources can be vulnerable in a variety of complicated circumstances.
Many people engage in asset protection planning as a way to preserve their most valuable resources from loss due to legal or financial issues. Preemptive asset protection planning is crucial for the preservation of resources ranging from a small business or an investment portfolio to a primary residence. The following are some of the circumstances that might put those assets at risk.
A divorce
Divorce requires the division of assets that are part of the marital estate. People can sometimes protect their homes and other resources by creating asset protection plans prior to marriage. Holding assets in a trust and negotiating marital agreements are some of the strategies that can preserve assets from divorce. Trusts can be particularly effective in cases involving family farms or ranches where one family member’s divorce could have an impact on everyone’s financial future.
A lawsuit
There are many reasons an individual might face litigation. Perhaps they caused a car crash and had lackluster liability coverage. Maybe they made some kind of professional mistake that led to a client or a former employer trying to hold them financially accountable. Personal assets and future income are at risk in a litigation scenario unless an individual has already acted to protect those assets.
Debt-related challenges
Individuals who command high wages or run their own businesses can be at risk of financial hardship with little warning. Job loss, shifts in the economy and other unpredictable circumstances could theoretically lead to an individual having debts they cannot pay in full or on time until their circumstances improve.
Creditors can sometimes initiate legal action against an individual seeking to place liens against their assets or force their sale as part of the debt collection process. Prior asset protection planning before the debt becomes an issue is usually necessary to preserve personal resources in scenarios involving overwhelming personal debt.
Individuals with valuable assets ranging from a small business to a primary residence may want to embrace asset protection planning as a way of mitigating their financial exposure. Asset protection plans can involve different tactics for people with different resources and for those facing different potential challenges. Sitting down to talk about personal holdings and concerns with a skilled legal team can help individuals legally protect their resources should future challenges arise.