Simple Steps You Can Take
There’s no sure-fire way to avoid risk, but there are steps you can take to minimize it. If you’ve worked hard to create personal wealth, it’s critical that you implement basic asset protection strategies, so that you’re not at risk of losing everything. Here are some general guidelines.
- Protect your assets before the need arises — This is a fundamental rule. Employ proactive, rather than reactive, asset protection strategies. In the worst-case scenario, an after-the-fact attempt to shield assets might be construed as a fraudulent transfer.
- The best tool for personal or business asset protection is insurance — Asset protection strategies should never be an alternative to obtaining the right amount and type of insurance. Most insurance policies will pay the costs to defend a lawsuit—an asset protection plan won’t.
- Separate your personal assets from your business assets — The best tool for protecting personal assets is a trust. With a business, it’s the appropriate business structure. Stay away from a sole proprietorship or general partnership, though. With those business forms, a debtor may be personally liable for the debts of the business.
- Relinquish some control — Whatever the structure you establish to provide a barrier to liability, make certain that you don’t jeopardize the separation of liability by exercising too much control. You don’t want a creditor to argue that you and your business (or that you and your trust) are one and the same. A court may agree and wipe out the legal distinction.
- A bankruptcy filing is not a good asset protection plan — The days are gone when you could turn to Chapter 7 or Chapter 13 to get relief from creditors and protect assets. Many of the property exemptions are now extremely limited.
- Offshore accounts may not protect you — The recent trend has seen many courts subject debtors with offshore accounts to “repatriation orders.” Essentially, that means the court will order the return of offshore funds to the United States and can hold a debtor in contempt of court (and in jail) for violating the order.
At MCIS Law, PLLC, in Stafford, we aggressively advocate for businesses and individuals in southeast Texas. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.