The more assets you own, the more susceptible you are to getting sued. It’s now easier than ever for creditors and even the government to identify individual assets and freeze them even before a trial occurs. Just one lawsuit can result in you losing it all, so it’s important that you take the necessary preventative measures so you can be prepared for when the worst happens. Here are some effective strategies to protect your assets from a lawsuit.
Asset protection trust
Putting your asset into the appropriate trust is a powerful form of asset protection. Asset protection trusts (APT) allow you to allocate a part of your assets to a trust that’s run by an independent trustee. This keeps it safe from the government and creditors. Several states, such as Rhode Island, South Dakota, Alaska, Nevada, and Delaware, allow you to put your trusts in an APT even if you aren’t a resident of that particular state. But the most airtight strategy would be to transfer your assets into an international trust. International asset protection exists outside the jurisdiction of the U.S. courts and offers the benefits of more advantageous protection laws.
Individual retirement accounts (IRAs) are protected under federal law so long as they’re ERISA-qualified. You may be eligible for stronger protection law, depending on where you live and what the respective laws are there.
Turn your individual assets into join assets whenever possible. Creditors are less likely to pursue jointly owned assets since it’s much more difficult to go after multiple asset owners. There is a lengthy and expensive process that creditors need to undergo to split the asset from the other owner. In addition to this, over 26 states now have a type of joint ownership where property owned by a married couple can’t be partitioned. This is known as “tenancy by the entirety” and affects states like Florida, Arkansas, Oklahoma, and Vermont, where this ownership applies to all types of property. Meanwhile, in Illinois, Kentucky, New York, Alaska, and Michigan, this ownership only applies to real estate.
Separating your personal assets from your business assets will make it more difficult for creditors or the government to take your property away from you if only your business is sued. You should also register your business as a limited liability company (LLC) or as a corporation. For added protection, your personal assets should be separated from your spouse or your family members.
The government and creditors can’t seize your assets if you don’t own them. You don’t necessarily have to get rid of your assets, but you can transfer ownership of them to your spouse or other family members instead. Review all your asset titles and see which ones can be transferred to a family member — creditors can’t legally force them to sell the asset since the lawsuit won’t have anything to do with them. Furthermore, if you’re involved in a high-risk profession, you can allocate your assets to your heirs ahead of time by way of an “advance on your will.”
Keep your assets safe from legal disputes with any of these foolproof asset protection strategies.