When you own a business, you could face liabilities or owe many creditors in the future, and you should take steps to protect your assets. Asset protection planning can help protect your assets from creditors. However, you need to avoid common mistakes if you want your plan to work.
Avoid These Six Mistakes When Developing an Asset Protection Plan
Your best strategy is to be proactive about protecting your assets rather than waiting until you face financial difficulties. By the time the bills are mounting, it can be too late to successfully keep your assets away from your creditors. Here are common mistakes you should avoid when creating your asset protection plan:
- Assuming it is illegal. Some people mistakenly assume that asset protection is illegal. However, people are free to protect their assets and arrange them in a way that is best for their individual situations. Fraud is only an issue if assets are protected for the purpose of defrauding or obstructing creditors.
- Waiting too long. Your asset protection plan should be created and implemented long before you owe a creditor any money. When you wait until after you are having problems paying a creditor or have a judgment against you, the steps you take could be considered fraudulent and reversed.
- Not identifying potential creditors. If you can identify potential creditors you may have in the future, you can create a plan that will protect your property from them and make your plan more effective.
- Not individualizing your plan. It is important not to use a specific plan just because a friend or family member used it. Your plan will help you the most if you look at your unique situation and potential problems with creditors and plan accordingly.
- Using the wrong trust. Be sure you’re using the correct type of trust to protect your assets. For example, a revocable trust may not be a good asset protection trust.
- Not making an estate plan. When you are creating your asset protection plan, you should make an estate plan, as well. This will structure how your inheritance is distributed and protect your assets from possible creditors after your death.
Do you need to develop an asset protection plan? Attorney Richard M. Seff is here to answer your questions and help you create your plan. Call our office today to schedule your free consultation.