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Tustin, CA 92780
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FAQ: What is an asset protection plan?
Asset protection planning is the process of organizing one's assets and affairs in advance to guard against risks. . . .
Asset protection planning is the process of organizing one's assets and affairs in advance to guard against risks to which the assets would otherwise be subject. The phrase "in advance" warrants strong emphasis. One who is planning to protect assets must be cautious and avoid the negative implications that may follow if there are creditors who are entitled to remedies under applicable fraudulent transfer and similar laws. Asset protection planning may be applied to protect every type of asset, including an operating business or a professional practice.
Why asset protection planning? Safeguarding assets from the many risks involved is not a new idea or planning goal. However, asset protection is more in the forefront of planning because of expanding theories of liability. New liability theories are sometimes coupled with results-oriented judges and juries who decide things based more upon a perceived desired outcome than upon the law. An ever-present concern includes some of the high dollar amounts of jury awards that we hear about today.
Planning tools. Although developing an asset protection plan can be a difficult undertaking, there are many common techniques that exist for protecting assets from potential creditors. No single asset protection technique will unconditionally protect all of a taxpayer's assets. A plan needs to involve a mix of the various tools and techniques available to the planner. Various "ladders of asset protection vehicles" represent one tool used to identify the various tools available to the asset protection planner who arranges them in ascending order of efficacy. At the bottom of the ladder is gifting, midway up the ladder is the family limited partnership, and close to the top of the ladder is the foreign integrated estate planning trust (IEPT).
As important as it is to know what an asset protection planning component is, it is equally important to know what it is not. Asset protection planning will not aid a client in evading the payment of taxes. Asset protection planning does not use the concept of hiding assets but works in general to protect those assets. A hidden asset may be found, but a protected asset is a more secure one.
Please contact this office if you would like to know more about how an asset protection plan might be designed specifically to address those risks that you may face now or in the future.
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