If you’ve worked hard and saved wisely, you could become a target for groundless lawsuits and unscrupulous creditors. How can you protect your assets legally and effectively? In California, effective, long-term asset protection begins by consulting a Fresno asset protection attorney.
If you have anything of value, you could be targeted. People with significant assets can be sued unexpectedly at any time. If a lawsuit is filed against you, and if your insurance won’t or can’t cover the claim, your assets will be at risk. You need the maximum possible legal protection.
However, by taking a number of legal steps in advance with guidance from a Fresno asset protection lawyer, you can effectively protect your assets and properties from lawsuits and creditors. If you will keep reading this brief discussion of asset protection, you’ll learn how.
How Does Asset Protection Begin?
Asset protection is the reorganizing of your finances to protect your assets from lawsuits and collection activities. It means changing the legal ownership of your assets or the location of your ownership so that creditors and judgment holders cannot have legal access to your assets.
Several legal tools are available that either create a legal barrier between you and your assets or move the assets into legal structures that limit your liability. Before you can know which tools will be required to protect your assets, you will have to identify the assets you need to protect.
A Fresno asset protection attorney can help you determine which of your assets and properties already have legal protection and what steps you must take to protect your other properties and assets.
What Are the Basic Asset Protection Strategies?
There is no single asset protection strategy that is right for everyone, but the first step for most people is purchasing insurance coverage. For too many people, however, that first step is their last step, and your policy may not provide the full protection you need when you need it.
A trust or a limited liability company (LLC) can provide that full legal protection. After a review of your financial circumstances and your needs, a California asset protection attorney can determine whether you need the asset protection offered by a trust, an LLC, or both.
What Are Limited Liability Companies (LLCs)?
A limited liability company is a business structure that protects the LLC’s owners (called “members”) from liability. If you own a sole proprietorship or partnership, establishing a limited liability company can protect your personal assets against creditors and liability claims.
In California, transferring your assets and properties into a limited liability company is an asset protection move that can be particularly effective for real estate investors, landlords, and the owners of new businesses in this state.
How Does an LLC Shield an Owner’s Personal Assets?
Have a Fresno asset protection lawyer help you document each asset or property transfer to your LLC and advise you regarding the potential tax ramifications. As a limited liability company member, you may transfer your properties and assets into your LLC for these reasons:
- To capitalize your business: Your contribution may be personal property, cash, real estate, or any combination of these. You obtain equity in the LLC in return.
- If you own investment property, to shield you from liability: An LLC can protect a property owner’s assets and property if a liability claim or a debt collection activity involves investment or rental property.
One effective way to protect real estate is by transferring it to a holding company. Typically, a holding company is an LLC. The holding company will have ownership of the property and will be legally distinct and separate from you.
If your real estate holdings are complicated and extensive, your attorney may suggest establishing several interconnected LLCs or moving your properties and assets into a trust.
What is a Trust?
A trust is a financial and legal arrangement that is described in a trust document created with an attorney’s help. The “trustor” who establishes the trust selects a “trustee” to hold title to the trustor’s properties and assets for one or more beneficiaries.
Different types of trusts can accomplish different goals. A trust can shield your assets against creditors and lawsuits, and depending on the type of trust, a trust may also reduce your taxes or allow your estate and beneficiaries to avoid probate court after your death.
When you set up a trust, your properties and assets may be transferred into the trust as long as you are alive. Upon your death, your trustee’s duties will be comparable to the duties of a will’s executor, but without the interference of a probate court.
How Do Trusts Protect Assets and Properties?
As mentioned previously, there are different trusts for different circumstances. Asset protection trusts are irrevocable trusts, which means that properties or assets transferred to the trust remain there permanently. Asset protection is a leading reason why people set up irrevocable trusts.
While the properties and assets that you move into your irrevocable trust remain yours and under your control for all practical purposes – you can still take a vacation at your vacation home, for example – the trust becomes their legal owner.
Removing your assets from your legal ownership protects those assets from lawsuits and collection activity. Trusts are prepared by trustors working with their asset protection attorneys, who together determine which properties and assets will be transferred to the trust.
When Should You Contact an Asset Protection Lawyer?
Effective asset protection in California must be established before assets or properties are placed at risk by a lawsuit or collection activity. In other words, you need to take action now and schedule a consultation with an asset protection lawyer before a threat to your assets emerges.
If you transfer a property or an asset to avoid a judgment or impede a collection effort after a lawsuit is filed, that transfer is legally considered a “fraudulent conveyance.” A court will void the transfer, and your assets and properties will remain at risk.
What Else Should You Know About Asset Protection?
The key to effective asset protection is moving assets and properties to a place where creditors and lawsuits can’t reach them. A California asset protection attorney will help you do this.
It’s the way to make sure that a lawsuit or a collection activity does not wipe you out. If you have a family or own a home, a business, or any significant assets, speak to an asset protection attorney – promptly – about trusts, LLCs, and your other options for protecting what is yours.