Your goal in thinking about an asset protection plan is to work with a professional to plan to prevent lawsuits and increase leverage in negotiations if lawsuits are brought against you. This type of planning is part of the Estate planning and the aim is to place assets out of reach future creditor. Many doctors, landlords, and other professionals and business owners in high-risk businesses are interested in asset protection planning. In this article, I will discuss one of the effective asset protection strategies. I emphasize that asset protection is a proactive type of legal arrangement, and there is no legal way to make such a transfer whenever there is a pending lawsuit, or threat, or other event occurring that would make the transfer considered a “fake delivery.”
Also, it is not “tax evasion”, in the sense that there are tax benefits arising from this type of planning.
Asset Protection Planning involves a great deal of confidentiality and trust between the person protecting their assets and the attorneys and other service providers who help prepare the plan. This is not a commodity product that can be purchased online; rather, it is a tailor-made plan for the client.
One of the goals of an asset protection plan is to prevent lawsuits by lowering your financial profile. Many service providers advertise the need for domestic asset protection trusts, as well as foreign asset protection trusts, to achieve this goal. In this article, I will only focus on sharing your business assets as an asset protection tool.
If you are a real estate owner, doctor, or other high-risk business owner, the first thing to do is to take stock of your assets. Here are some strategies for dealing with specific assets:
1. Equipment: If you own valuable equipment, create an LLC or other entity and lease the equipment back to your operating entity, be it a business or a professional practice.
2. Building/ Real Estate: If your business or professional practice owns a building, you transfer ownership to an entity, and have your business or practice lease it from that entity, on a long-term lease on very favorable terms. Secure lease payments with your practice or business assets, and file security interest liens on public records.
3. Receivables: It belongs to your business or professional practice, so it cannot be transferred to another entity. What you want a professional to help you is, among other strategies: a) factor the account, b) pledge the account, c) use the account to fund life insurance and d) secure the lease referred to in paragraph 2 above with receivables.
The goal with receivables is to allow these assets to be confiscated by practice in lawsuits. Again, all this planning should be done as a proactive measure, and not when a lawsuit is threatened or pending.
Asset Protection Planning involves a great deal of confidentiality and trust between the person protecting their assets and the attorneys and other service providers who help prepare the plan. This is not a commodity product that can be purchased online; rather, it is a tailor-made plan for the client.