How Asset Protection Works
Asset Protection, should I do it? Is it legal?
How asset protection works isn’t clear to everyone. For years at assetprotection.com, we have heard attorneys say to our clients, “Don’t do asset protection. It does not work.” It is never made clear to the client what “it does not work” really means. Does it mean that the attorney is afraid that if the client does asset protection that the attorney will not get paid? Does it mean that the judge will throw it out? Does it mean that the client will have to settle? Does it mean, as some attorneys will try to make you believe, that you will go to jail if you do it?
In truth, people do not go to jail for protecting their assets if they have done it in a proper manner. You cannot participate in a fraudulent conveyance or Voidable Transaction and expect asset protection to work. You must move the assets while the waters are calm. If it is your intent or desire to defraud a creditor then the methods mentioned on this web page will not work and should not be used.
Protecting assets through Limited Liability Companies, Family Limited Partnerships, and asset protection trusts
When people protect their assets by the use of some of the plans we recommend here, the assets are out of their name. The individual’s net worth does not change.
When a creditor gets a judgment against someone, that judgment is filed in the county where the person lives and sometimes even four or five counties around where they may live. When that is done, then any real estate assets, bank accounts, cars boats, planes, etc., automatically get a lien against them. As soon as the creditor files and takes a copy of the filing to the county recorder, bank, DMV, then they can get a lien on any assets that are in the same name as the name on the judgment.
If the asset is not in your name, then the judgment does not automatically attach to it. Assets that are in the name of Limited Liability Companies, Family Limited Partnerships, asset protection trusts, or another asset protected type of entity will not have judgments automatically attached to them. The asset protection entity would have to be a defendant in the case for the judgment to attach.
Time is on your side when it comes to judgments on asset protection.
85 percent to 95 percent of all judgments that are not collected in the first year are never collected. If you can have a plan in place that gets by the first year or two, then the chances are the creditor will move onto someone else.
It takes time and money for a creditor to try and break through an asset protection plan. Most creditors do not want to take that time and money. They purchase judgments in mass quantities and yours is just one of many. If you are difficult and the next one in the pile on their desk is easy, then who do you think they will pursue? Like anyone else, they have to feed their families and they will go after the easy ones.
What you know for sure is that if you leave assets in your name, then the creditor will attach them. If assets are not in your name, then you know that a creditor cannot automatically attach your assets, and that is the key. You do not want the automatic attachment that comes from having assets in your name.
If you are going to remove assets from your name, then it should be done properly. Giving them to friends and relatives will not work. You must use a proper tax-neutral asset protection plan with Limited Liability Company operating agreements, Limited Partnership agreements, and asset protection trust agreements that will hold a creditor at bay. Click here for why our limited liability agreements are better than the competition’s.
