How to Protect Your Assets

For most of us, asset protection consists of theThere are several reasons for this. First of all,
insurance policies we buy to protect our homepersonal injury lawyers, in spite of their reputation
and its contents and our autos. These policiesas sharks, really don't want to throw defendants
have the added benefit of providing you aout of their houses, even if they could. They
defense as well as source of funds to payrather go for the low hanging fruit - in this case
damages if you cause an accident.the proceeds of your liability insurance policy.
The law also provides various means of assetThey know that unless you were drunk or
protection, ranging from "homestead exceptions",grossly negligent, any liability award can be
protection of ERISA retirement funds fromdischarged in bankruptcy. They also know that
creditors, joint property ownership, bankruptcymany states have "homestead laws" that prevent
and more.the seizure of your home and that the money in
There are other types of asset protection thatyour retirement plans are protected by varying
are used by wealthy individuals to shield theirdegrees, depending on the state you live in.
assets from creditors or the tax man.In most cases, they will settle for the insurance
They are popular with professionals, who can losepolicy limits, even if they are lower than what the
everything through a simple error of judgment.case might be worth.
Business and property owners may use them asHowever, especially in cases with severe injuries,
a tax shelter and/or estate planning measure, asthe lawyer might have no choice but to pursue
well as a way to avoid creditors.your personal assets if your insurance coverage is
The problem with most asset protection schemesnot adequate and you do have other assets to
is that they are expensive to implement andattach - don't forget your wages are an asset
maintain, almost always forcing you to give up alland can be garnished.
or part of your ownership in the asset you areFor this reason, anyone with a good income and
trying to protect and, in many cases, are illegal tothe usual collection of assets, for example a
boot.home, car, IRA's, other savings and investments,
Trusts, different corporate and partnershipsome original art, silverware, jewelry, etc should
entities and off-shore accounts are popular in thiscarry at least $1 million in liability coverage, maybe
field.more if you live in high verdict states like
If you are one of those who feel they need thisCalifornia and New York. Your insurance agent
kind of protection, consult a very well qualifiedshould be able to advise you on a prudent liability
lawyer - a CPA by himself won't do. And applylimit.
common sense. A lot of so-called professionals inThis can be done by buying single limit liability
this field have wound up getting their clientscoverage of $100,000 on your auto insurance and
indicted or into serious tax problems because ofhomeowner's insurance policies. You then buy an
miscalculations they have made.umbrella policy with a $100,000 deductible. If you
There is also an abundance of fraud, especiallydo this all through one agent, he can tie
with off-shore accounts. The money you depositeverything together so that your coverage to a
into an off-shore trust might simply disappear.million or more is seamless.
Don't forget the IRS has been subpoenaing theProperty Transfers
names of people who just bought books aboutIf you have already had an accident or have been
off-shore investing from the so-called gurus ofsued for some reason, it is too late to try to
this field and are now delving into their finances.transfer property to another. It will likely be ruled
Finally don't trust that the lawyer-client relationshipfraudulent, as will transfers made shortly before a
will protect you, especially if you're moving moneybankruptcy filing.
off-shore. I've witnessed several instances ofIf you suspect you might be sued (or might have
lawyers turning their clients in when the IRS orto go bankrupt), especially for something you
District Attorney pays them a visit.have no insurance for, for example, a business
Asset Protection for the Rest of Usdeal gone bad, consult a lawyer. You might still
Most of us just have to worry about the simplehave time to transfer assets to either a relative,
mistakes we can make that cause personala trust or to another corporation.
injuries to another. A car accident or a slip and fallDo not do this on your own. If done incorrectly,
on your property can result in a lawsuit and ayou might face tax consequences and/or criminal
huge claim for damages.charges and still face the loss of your property.
This is where our homeowner's or auto insuranceAnd remember if you transfer your property to
companies step in. They will provide lawyers toa relative, it can then be attacked by that
defend the claim, hire experts if necessary andrelative's creditors.
pay damages up to your policy limits.This article does not purport to offer legal advice.
In spite of the rash of lawsuits plaguing the US,Always seek the advice of a well qualified
most people with adequate insurance have little toattorney before taking any steps to shield your
worry about.assets.