I've read in several personal finance books that assets can be protected using multiple techniques and can be layered for additional protection. Apparently, the more you have in assets the bigger target you become to a predator lawyer. However, these authors claim that assets can be protected even if there is a good possibility of having claimants at the door. The point is not to have control of any assets. I'm thinking that once an event occurs on a particular date, any movementsof assets after that date are suspect/disallowed. So, how can asset protection lawyers claim they can get around this? Does anyone else have any thoughts on this?
asset protection lawyers - worth it?
- Thread starter engr
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ziggy29
Moderator Emeritus
The legal term is "fraudulent conveyance" -- meaning you are intentionally shedding assets in order to avoid losing them to lawsuits and creditors, or in order to qualify for means-tested public benefits.
You are correct -- while moving assets out of your name after an event that is likely to introduce liability to you is not *always* proof of fraudulent conveyance it's generally assumed that it is.
The state you live in will have a significant impact on your ability to shield assets from creditors -- no lawyers required (until a significant event occurs, anyway). I live in Texas, which has some of the most generous asset protection laws in the country (along with Florida and Oklahoma). All 401K plans, IRAs, annuities, insurance policies and homesteaded personal residences have (in general) unlimited protection from seizure by creditors or judgments.
As in the case of fraudulent conveyance, suddenly opening a $200,000 annuity the day after you caused a car wreck that put someone into intensive care will raise a legal red flag, though. But if you did that the day *before* the accident, at least in the three states I mentioned that money would likely be safe. Having said all that, the first line of defense is an umbrella liability policy.
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Get a multi-million dollar umbrella insurance policy and keep your mouth shut about it. It will likely be more cost effective than hiring a lawyer and if someone comes after you, let the insurance company deal with it.
Of course, if someone is already after you, it's too late to contract such policy.
Of course, if someone is already after you, it's too late to contract such policy.
The problem with asset protection is that there really isn't anyone advocating all of the free / cheap things you can do for asset protection. Some of the attorneys out there can rack up big bills creating a myriad of trusts, LLCs, corporations, offshore stuff, etc. The problem is that some of it may not be legal, some might be borderline and not stand up in court and some might be over kill.
Some free / cheap things you can do besides carrying insurance are setting up limited liability entities for each separate businesses or rental property you own, carrying a big mortgage on your home, use home equity loans to keep money out of your house, keep your money in an ERISA qualified 401K instead of an IRA, give money away to your kids under the gift tax limits each year, and live in a state with favorable asset protection laws.
(I'm not saying these are always the right things to do for everyone, just that they are free / cheap options to consider.)
Some free / cheap things you can do besides carrying insurance are setting up limited liability entities for each separate businesses or rental property you own, carrying a big mortgage on your home, use home equity loans to keep money out of your house, keep your money in an ERISA qualified 401K instead of an IRA, give money away to your kids under the gift tax limits each year, and live in a state with favorable asset protection laws.
(I'm not saying these are always the right things to do for everyone, just that they are free / cheap options to consider.)
Seems like an umbrella policy is a good way to go. I thought that there were companies that, for a price, could find out where all your exposed assets were- so much for privacy laws. That being the case, the bigger the umbrella policy, the larger target you become so no amount will ever be enough. However, the insurance company would be more motivated to protect their money- at least up to the policy limits, then you're on your own.
Umbrella policies seem to be a good way to go. Does anyone have any opinions/experiences with asset protection lawyers? How would a layperson really know if they're really protected since all this legal stuff is difficult or impossible to interpret. Any comments?
Umbrella policies seem to be a good way to go. Does anyone have any opinions/experiences with asset protection lawyers? How would a layperson really know if they're really protected since all this legal stuff is difficult or impossible to interpret. Any comments?
