Do you need to know how to protect assets from a lawsuit? There are many things to keep in mind about asset protection–the most important being that state law is a huge factor–what is possible in some states may not work in others depending on things like community property laws (which govern how debts in a legal marriage are divided up in a divorce), real estate and probate law, etc.
The advice below isn’t related to mortgage or asset scams, but knowing the law in this area is just as important for those who need to protect their wealth from lawsuits as well as from con artists.
How To Protect Your Assets
The first thing you need to do in order to protect your assets from a lawsuit is to understand the laws that may affect you in this situation.
For example, some people choose to place their wealth in asset protection trusts–a handful of states in the U.S. (not all of them) have laws that permit citizens to use asset protection trusts and do not view them as a form of potential tax evasion or other problems.
Some published sources say, Nevada, Delaware, and Alaska are just some of the states that permit this–but what you don’t know about asset trusts can hurt you if you have plans to access your assets later on. What do you need to know about asset protection trusts?
- State law will dictate how and when you can add or remove funds from such a trust. Know the law;
- Such trusts must be considered legally irrevocable;
- At least some of your assets must be located in the state where the trust has been established;
- Only the trustee may allow the dispersal of funds;
- Only a state-authorized agency may administer such trusts.
Transferring Your Assets Into Someone Else’s Name
A common method to protect assets from lawsuits is the simple transfer of assets, property, shares, or other items into someone else’s name. There are large implications of this action–legally speaking the person who now “owns” your assets actually legally DOES own them.
If they don’t adhere to the terms of your agreement, you have no legal recourse whatsoever. Take this approach with caution and remember that some state laws may have certain requirements that prevent asset transfer under certain conditions such as an ongoing legal case.
Some states have laws regarding “fraudulent conveyance” which is described by at least one legal website as “moving assets with the willful intention of placing them beyond the reach of a creditor who has a legitimate claim to them”.
Do not run afoul of these laws and remember that you will need to learn the legal requirements of your state to know what may or may not be illegal there. Those who may have unwittingly participated in an illegal asset transfer should know that they may be legally liable for such schemes, but many states may have a statute of limitations on prosecuting such cases–know the law and know your rights.
Protecting your assets from legal action can be tricky–it is always the best idea NOT to attempt this yourself. Get the advice of a legal expert with experience in asset protection law in your state. Remember that lawyers have years of training and experience, but not all of them have the same experience in the same areas. Research your legal professional carefully!
Joe Wallace specializes in personal finance, military affairs, and consumer protection topics. Since 1995, his work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and collects unusual vinyl records, which gives him an excuse to write the vinyl blog Turntabling.net.