Asset protection is an important aspect of wealth management as it protects your wealth from a legal claim or threat of a claim. This is not to say that legitimate lawsuits cannot be brought against you; asset protection protects you from those that are nefarious in nature or that would cause catastrophic loss. Lawsuit protection is a fact of life for anyone who may be targeted due to their “deep pockets.”
Just like you invest in health insurance to prevent large medical bills from devastating you in the event of an illness, investing in asset protection planning prevents huge financial losses in the event of litigation. An attorney who is educated and well-versed in this highly specific area of the law can help you put a plan in place for protecting your property and other assets.
Legal Solutions that Provide the Protection You Need
Given that the U.S. has become an increasingly litigious society, high net worth individuals have to be constantly on the lookout for potential legal claims. Purchasing liability insurance is a step in the right direction, but even that can be seen as easy pickings for those seeking to initiate a lawsuit. And there is no guarantee that a judgment will not exceed the limit of insurance coverage and spill over into your private assets.
What an asset protection attorney does is use all available legal tools to help their clients protect their assets from future claims. They are governed by the rules of professional conduct and as such, must act as good faith advisors on the client’s behalf. One of the most effective tools to use against legal claims is a complex financial planning instrument called an asset protection trust (ATP). At times, the knowledge that an ATP has been implemented is enough to deter litigation in the first place, which increases their effectiveness.
There are two types of asset protection trusts: domestic APTs and foreign APTs. Both are irrevocable and function as asset protection vehicles.
Are You at Risk for a Lawsuit?
Who should engage in asset protection planning? Some vulnerable targets include business owners, those with a large portfolio of real estate, professionals that are subject to malpractice laws and high net worth individuals to name a few.
Take the lawsuit exposure test to see if you need asset protection planning. Keep in mind, this is a preventative measure, and will not be helpful if you are about to be or are already involved in litigation. Contact our offices to discuss putting together a strategy to protect your wealth in the future.