Why You Must Consider Asset Protection
The primary concern for most people when deciding to strategically default is being chased for an unpaid debt. Especially if the debt involves a deficiency stemming from a foreclosure sale of an upside down property. For example, if a property is sold for $350,000 at a foreclosure auction and the original mortgage balance is $500,000 then there is a deficiency of $150,000. In certain states, a homeowner can be personally liable for the $150,000 deficiency debt. For those of you who read this website you will find advice and strategies on how to deal with deficiency debt.
Many strategic defaults involve property owners who have income, savings, and investments. If a deficiency debt becomes a deficiency judgment then the former property owner's assets can be exposed to debt collection efforts. The exposure can be in the form of wage garnishment, liens on bank accounts and the seizure of other assets.
How does one sufficiently limit the risk of future bank liens or property seizures? In other words how does one achieve the primary goals of a strategic default which are:
- Cash Flow Protection.
- Savings Preservation.
- Wealth Protection.
One answer is asset protection. We have decided to provide our readers with an introduction to asset protection. We will not endorse any specific asset protection techniques or strategies on this website. We want our readers to be aware that asset protection is a legal method in which to protect their assets. Keep in mind that the implementation of any asset protection strategy requires the advice from a qualified professional, such as an attorney or an accountant. The professional can evaluate your unique circumstances and apply your circumstances to the relevant state and federal law. In this way, you can develop the best asset protection plan that suits you!!
What is an asset? Generally assets are businesses, real estate, securities and investments, personal property, cash, and intellectual property (patents, trademarks, copyrights, knowledge, trade secrets). Assets also consist of your well being. However this is related to your state of mind and health, so a creditor can never actually get its hands on it but a creditor can surely negatively effect it.
What is asset protection? Asset protection is the implementation of legal structures, techniques, and strategies that protect and preserve what you earn, what you create, and what you acquire. Remember, a true asset protection technique is always legal. Also understand what asset protection can and cannot achieve? If you owe a debt then asset protection will not completely hide all of your assets from the owner of the debt. Instead, it can provide a defensive shield against the collection of the debt. The defensive shield may allow you to settle with the creditor for a lower amount. It may deter the creditor from chasing you because it is to costly. It may provide you time to gather your resources so you can pay back the creditor. Furthermore, asset protection can be used to lower taxes and to protect against lawsuits, death, or disability.
There are many legal methods to protect your assets. Generally, asset protection techniques can be categorized as follows:
- The use of legal strategies, structures or techniques to insulate an asset from being taken or discovered.
- The purchases of insurance.
- The use of appropriate tax planning strategies to minimize the depletion of assets.
- The development of a proper estate plan to transfer assets to children or other family members with minimal costs.
- The organization of an asset protection team that knows how to use the proper legal structures and knows how to implement the best tax savings techniques. At minimum, this team normally consists of a qualified attorney and a qualified accountant. The team can consist of an insurance agent and/or business consultant.
The purpose of this article is to get you to start learning about asset protection. Take some time to read books on asset protection. Take some time to speak with qualified professionals. Learn how to protect your assets after a strategic default. It is well worth your time.