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Are Your Assets Protected From Creditors?

Are Your Assets Protected From Creditors?
Alexdans | Dreamstime.com

By    |   Sunday, 16 April 2017 11:12 PM

Have your ever thought of your creditors as financial predators?

Did you think that because you owe them money that somehow they are your friend and not a significant financial risk?

When your read about the latest creative lawsuit filed by some money hungry plaintiff’s lawyer, why is it that you think it couldn’t happen to you?

Can it be that when divorces happen to 50% of marriages, that your marriage will be the one that lasts?

(Although a couple of divorced friends of mine tell me that the experience makes then feel the number is 3 out of 2.)

Do you work in an industry or own a business that is regulated by the government and trust that the government will not target you?

When you have worked so hard at getting a nest egg and some financial security, then why aren’t you working even harder to protect it from being taken away?

You do realize that it’s not how much money you make that counts, but how much you keep?

Financial security only comes when that money is protected from the unknown, unintended, unexpected economic risks that happen with such great regularity.

Risk management is supposedly on the menu by any number of different financial professionals trying to sell you their services.

But are any of them thinking about what would make sense for your circumstances?

I mean, there is more to protecting your investments and your ability to earn more assets than just focusing on portfolio asset allocation.  

Sometimes just making a pragmatic change in practice or protocol is all that is necessary to achieve a significant level of additional risk management.  For example, physicians know that patients who are smokers invariably have poorer outcomes from operations than non-smokers.  Poor outcomes are what generate malpractice lawsuits. Consequently, more and more doctors are requiring patients to be smoke free for six months or longer before they will consider a procedure.

It’s easy enough to use a limited liability entity instead of holding title to hard assets or financial accounts in an individual name.  Every state has enacted some form of legal limited liability entity to stay competitive against all the other states.  It’s fair to say that protecting assets from creditors has become public policy.

There is a growing list of states that are aggressively enacting new forms of legal structures to attract financial business.  Not only are corporate type entities being offered, but there is a growing list of states offer that asset protection trusts and other goodies.

Once the province of the offshore tax-haven jurisdictions, states have gotten into the wealth protection act in a big way.  Consequently, the United States is rapidly taking over as the favored offshore asset protection jurisdiction to the rest of the world.

Why aren’t you taking advantage of this?

For most people insurance and annuities held in a wealth protection trust represent a simple and cost effective means to keep wealth protected from legal and financial risks. And achieve tax protection as well.

Not all states are equal. California is not particularly friendly to debtors while Nevada, South Dakota, and Delaware among others have been eager to develop asset protection business.

Florida, where I live, has no personal income and is well known for its variety of exemptions and exclusions from creditors but not otherwise very adventuresome. 

I suspect that competition among states to become attractive to businesses and investors will continue to build with more and more states becoming debtor oriented by offering various forms of legal shelter from legal and financial risk exposures. 

What I can say with confidence is that the future is filled with financial uncertainty. 

At times like this, it pays to take every legal advantage available to protect your hard-earned assets from creditors.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

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Have your ever thought of your creditors as financial predators?
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Sunday, 16 April 2017 11:12 PM
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