The good news is that starting a proactive asset protection plan well in advance of any foreseeable incident is the best way to keep what you have worked so hard to earn.
Asset protection is a widely misunderstood section of law. Many people erroneously assume that only the wealthy have assets worth protecting. Others mistakenly believe that insurance is a universal safe haven. To help clarify these issues, keep reading as we debunk some of the most prevalent asset protection myths.
Myth #1 – Asset Protection Is Only for the Wealthy
We read about high-profile lawsuits every day in the news and on social media, yet we may or may not have a friend or family member who has gone through a lawsuit.
As such, it can be easy to assume that asset protection is a concern for only the privileged elite.
This could not be further from the truth
According to John Skabelund of Skabelund Law:
“Protecting your assets isn’t just for the wealthy; it’s about securing what you’ve worked hard to build against unexpected challenges. Everyone can benefit from a solid asset protection plan.”
Regardless of how many zeroes are at the end of your net worth, the pain will be the same if you lose everything. Be proactive to ensure that what you have worked so hard to build is not wiped away by one unfortunate incident.
Myth #2 – My Insurance Will Protect My Assets
Make no mistake: insurance is a great place to start when it comes to asset protection. Solid liability coverage from a reputable insurer can go a long way toward protecting you against total loss.
With that said, there is a reason insurance policies are impossibly thick. These documents contain a never-ending sea of fine print, loopholes, exclusions, and exceptions that insurers will use to get themselves off the hook. If you are one of the few who take the time to dig deep into your policy, you will likely be shocked to find out the items that you thought were covered but are, in fact, excluded.
Even if your policy has you covered, you are not protected should the insurer go bankrupt. Consulting with an asset protection attorney can provide additional strategies to safeguard your assets. In addition, a payout will likely cause your future premiums to spike or limit future coverage.
Myth #3 – Transferring Assets to Family Members Will Protect Said Assets from Creditors
Fraudulent conveyance.
Voidable transfers.
These are fancy ways of saying that the law does not allow you to transfer assets to family members after an incident to protect them from creditors. This applies whether or not you knew a lawsuit was pending.
When a judge suspects these types of fraudulent transfers, they can deem the assets to be returned to the transferor and subject to creditor settlement.
In some cases, fraudulent conveyance can be ruled even if an incident is “reasonably foreseeable.” For example, if a long-haul truck driver transfers assets to a family member right before a cross-country haul into the Alaskan tundra.
Myth #4 – Assets Owned or Co-Owned By My Spouse Are Safe from Creditors
This is perhaps the greatest asset protection myth of all.
Assets are NOT universally protected simply because they are in your spouse’s name.
Many states adhere to community property laws. Any assets accumulated during a marriage are subject to community debts regardless of title.
In other states, marriage assets are usually at least 50% vulnerable to claims against either spouse.
More persistent creditors can get even more creative. In most states, the non-vulnerable spouse having title is not enough. If it can be proved that assets owned by the non-vulnerable spouse are 1) purchased using the liable spouse’s funds, 2) used by the liable spouse, or 3) controlled in any way by the liable spouse, then the creditor may be able to seize these assets–even if they are solely in your spouse’s name.
Don’t Wait: Protect Your Assets Today
Myths are prevalent when it comes to asset protection. The good news is that starting a proactive asset protection plan well in advance of any foreseeable incident is the best way to keep what you have worked so hard to earn.
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