There are many different ways to protect your assets from creditors. These can depend on your personal interests, your business interests, your family, and other factors. The best course of action is to review your situation with an experienced asset protection lawyer. We can review your finances, your goals, and your needs. We’ll help draft the right documents to manage your interests, now and after death.
Asset protection strategies may vary. Factors to consider might depend on whether there are any current judgments or liens, if you’re going through a divorce, or if you’re in need of a bankruptcy. Other factors include your current physical and mental health. In the next few posts we’ll outline a few of the various legal techniques you can employ to protect your wealth.
Asset protection strategies to consider
- Form a business. Forming a business can protect your assets from claims against the company’s individual shareholders. This happens as long as you comply with corporate laws so that creditors can’t pierce the corporate veil. This includes understanding the differences between a C Corporation, an S Corporation, and a Limited Liability Corporation. Partnership agreements generally offer protection involving claims between the partners, but not from third parties.
- Title to the property. In non-community property states, if a property has joint owners and only one is liable, creditors generally can’t seize it.
- Insurance. It helps to have as much liability insurance and work insurance as possible so that if there are valid claims by injured parties, they will be paid through insurance company proceeds and not your personal or business assets. Creditors generally can’t attach life insurance proceeds which are payable to a named beneficiary. In addition to standard insurance, consider purchasing umbrella insurance.
- Separating assets. As a general rule, you should separate your business and personal assets. For example, owners of small business should consider incorporating their business, and getting a separate credit card for it. Owners of small corporations should make it a rule to sign documents in their corporate capacity and not as individuals.
- Understand your state’s laws. You need to know if your state is a community property state or not. Some states, like Arizona, have sizeable homestead exemptions. This means that homeowners have the right to shield an amount of equity from creditors. Other states do not.
- Trust agreements. An experienced lawyer can explain the general principles of trusts, and the different types used to protect assets. For example, generally a trust needs to be irrevocable in order to protect assets from creditors and from the requirement to probate assets. An irrevocable trust means one that can’t be altered or undone. Some trust agreements go into effect immediately. Others go into effect when the person who creates the trust passes away. A lawyer can help you determine what kind of trust best suits your needs.
Talk with a respected Arizona business and personal asset lawyer today
It’s important to draft the right documents and implement the right strategies before there any claims made. Once a creditor files a lawsuit, the creditor may argue that the strategy is an attempt to defraud a legitimate creditor. Because of this, it’s helpful to move quickly on asset protection strategies.
Attorney Yaser Ali was chosen as a 2019 Super Lawyers’ Rising Star. He’s the 2018 winner of the Phoenix Business Journal’s prestigious 40 under 40 award. For help choosing the right asset protection plan, call Yaser Ali Law at (480) 442-4175. You can also fill out our contact form to schedule an appointment.