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Protecting Your Assets

You are being sued.

Just reading those words is enough to make you break out in a sweat. Even if it’s your business, and not you personally, or even if it’s someone in your family, notice of a lawsuit is among the most stressful events you’ll ever experience.

You’ll no doubt go through the normal emotions – surprise, indignation, anger, frustration, and even depression. Consider how the doctor in the Bernie Mac wrongful death case feels. The doctor was a longtime physician and friend of the comedian and no doubt felt like he did everything right to protect his patient. Bernie’s wife felt otherwise. (You can read the allegations about the wrongful death claim here.)

Being sued gives rise to the legitimate fear that you could lose all or at least a substantial part of your assets.

In these difficult economic times, as liability claims and litigation rates continue to rise, an increasing number of advisors and their clients, especially business owners and professionals, consider employing asset protection strategies to protect those things for which they have worked so hard.

The primary goal of Asset Protection Planning is to provide peace of mind if disaster strikes. This is accomplished by developing a wealth preservation plan that works. Asset protection strategies are generally not designed to control all of your assets. Rather, they are designed to take a certain portion of your wealth and protect it with legal structures that are likely to frustrate the efforts of future creditors. It is not designed to shield assets that are needed for short-term or mid-term financial needs. Rather, the goal is to provide assurance that at least part of your wealth is beyond the reach of creditors, and that you have the resources with which to “rebuild” in the worst case scenario.

Other goals of asset protection planning include:

-Taking the decision out of the hands of local judges

-Allowing lawsuits to be tried and heard by a jury

-Allowing the negotiation of favorable settlements

-Allowing long-term planning

-Avoiding having one lawsuit ruin your life and the life of the your family

-Allowing discovery of assets but having those assets protected

-Allowing the professional to continue to practice

In today’s litigious society, there is virtually no way to anticipate how your assets or the assets of your clients may be exposed to potential creditors. If you own a business, or practice a profession (medical, legal, accounting, engineering, or architecture), it is impossible to foresee the financial pitfalls that lie ahead.

Even though many businesses are operated as corporations or limited liability companies (which traditionally offer protection from business debts), there is a growing trend toward attaching certain business liabilities to the business owner. For example, certain tax obligations can attach to the business owner, as well as liability for sexual harassment lawsuits, even if the unlawful acts were committed by a non-owner employee. In addition, several environmental regulations routinely impute liability to the business owner.

Although most business owners and professionals are careful and diligent about how they operate, we simply cannot ignore the wide variety of risks to which all of us are exposed. Years of hard work to build for retirement and improve your family’s life could be wiped out by the banging of the gavel. For that reason alone, it makes sense to learn more about asset protection planning, and decide if any of these strategies are appropriate for your clients – or for you!

To talk more about this issue, click here to have our office call to set up a time to discuss this with you.

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The information contained on this web page is general by its nature. For that reason, no one should take any action based on the information contained in this webpage until having consulted a competent professional advisor or advisors. Nothing contained in this web page was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties under the Internal Revenue Code. No information contained on this webpage relating to any federal tax matter may be used by any person to support the promotion or marketing or to recommend any federal tax matter. Taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter described on this webpage.

 

 

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