This article explains how assets can be protected from various threats, including being sued, with careful planning and business law expertise. This is not always easy, however, and companies and individuals can run into significant trouble and even greater liability if it is not done correctly. The following article explains:
- When is the right time to protect your assets.
- How family members can be included in your asset protection.
- Why hiding assets is never the right answer, and what to do instead.
When Is The Best Time To Protect My Assets?
When it comes to asset protection, timing can be everything. The best time to take steps to protect your assets is immediately when you have assets that are not protected by law from creditors. You never know when you will need the protection, so you should always immediately consider various asset protection vehicles.
It doesn’t matter if you have $100,000 or 10 million dollars of assets to protect. That money is most likely incredibly important to you and to your future, and you never know what might happen.
One client who lived in a wooded part of Texas exited her winding driveway and ran right into a motorcyclist and killed him. It was completely accidental, with no criminal liability, but she was terrified that she would get sued.
The good news was that she had assets that were already creditor-protected by law since she had planned ahead, and the family of the deceased motorcyclists would not be able to claim anything from her beyond what the insurance company provided.
Should I Just Give My Assets To Family Or Friends?
It can be a natural instinct to wish to simply give away any at-risk assets. But while the instinct is not inherently bad, it is not necessarily a good or wise one either. Such a transfer of assets could be challenged as fraudulent, just like the creation of any asset protection measures if taken too late.
However, the additional problem with giving assets to family or friends is the loss of control. People who give assets to their children, trusting that their children will take care of them, sometimes end up disappointed, and not always due to the breaches of trust. If their child dies first, the assets go to the next generation or to a spouse, without certainty that they can be trusted.
Protecting your assets while keeping them under your own control is the best of both worlds, and that is what The Vermillion Law Firm aims to provide. We strive to ensure you maintain control, while also building up liability protection.
Both of these are part of the estate planning and business succession work that we do. In addition, we look for ways to protect and maintain control of your assets while still providing for the next generation(s).
Can I Give Assets To My Children While Still Maintaining Control And Protection?
One technique that can be used, particularly with an LLC or a corporation, is gifting membership interests or stock in a corporation or partnership interests to your children. This allows you to keep control of the entity by making sure you always have a majority interest. It can also be a useful way of reducing the estate size for large companies.
Usually, this is done when someone wants to start giving interest in an entity or asset to their family members who work with them. For example, a father who has two of his children working in his growing business may want to provide this option to his children.
You can also give assets like membership interest, stock interest, or partnership interest to family members. However, the membership interest in an LLC and the assets cannot be attached. This makes LLC and other such membership interests particularly attractive for both asset protection and maintaining control.
What Is The Best Legal Entity For Tax Purposes?
Taxes are complicated, but there are plenty of specialists, like certified public accountants, who can analyze the best legal entity for tax purposes. They can also tell you how specific businesses, structures, and legal entities would affect your taxes.
Given the amount of additional specialization required, The Vermillion Law Firm would call on one of the many experts we are in contact with, to review that information as a third party. This is especially important because the best-case scenario for taxation purposes and the smartest choice for maintaining control and protection might not be the same.
Can I Hide My Assets?
It is considerably more difficult and problematic – not to mention illegal – to try to hide assets than it is to simply protect them. If you protect your assets in advance, you cannot be accused of hiding assets because everything is done with full legality, transparency, and efficiency.
What Is Insurance Subrogation? How Can I Protect Myself Or My Assets From It?
Everyone should have complete flexibility to enjoy their estates and pass them on to their children. In an ideal world, we would not have to worry about liability, but in reality, assets can be lost and subject to all kinds of problems.
One particular concept a lot of people do not understand is insurance subrogation. Most people do not realize that an insurance company can step in and sue an individual.
In the example of the lady who ran into the motorcyclist, if that man had life insurance that got paid to family members, the insurance company could have sued her. This is called subrogation. It allows the insurance company to be the plaintiff in a lawsuit to recover money that they paid out to the beneficiaries of the insurance policy.
In one example of this, a young woman in college borrowed a car from a friend and was in a small accident. The car owner’s insurance covered the damage, but within a couple of months, the person who had driven the car and had the accident was sued in the name of her friend. She was confused, thinking the insurance had covered everything, especially since her friend said that he had never tried to sue her.
As it turns out, his insurance company had stepped in to do it for him without even asking, using subrogation. The insurance company paid the claim and then stepped into his shoes and sued to get the money back from the person who actually caused the damage.
Accidents like this can happen to anyone, anytime. That could have happened to the lady who ran into the motorcyclist, and it would have cost her significantly more money. Fortunately, she was in a position to be free and clear from liability, and her assets safely protected because she had worked with an attorney years earlier to ensure their protection. Have you?
For more information about the Best Time For Asset Protection In Texas, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (972) 366-7201 today.