Asset protection is a set of strategies to protect your assets from being taken by predatory creditors. There are two parts of asset protection.
First, avoid creditor claims. You create creditors your own by taking on debt, behaving recklessly, failing to pay taxes, or associating with the wrong people – especially in intimate relationships. But you can’t always avoid creditors. You may lose a lawsuit and wind up with a judgment against you – even if you’ve done nothing wrong.
When this happens, the second part of asset protection comes into play: allocating your assets into two protected categories. You must do this allocation before you have a known creditor.
The first category is exempt assets, which are protected by law from certain creditor claims.
The second category is assets you placed beyond the reach of future potential creditors, for example in LLCs or protective trusts. This is the first of a series of short videos in which we’ll address asset-protection strategies.