definition of Asset Protection?
Asset protection is the approach and strategies used for securing the resources of an individual or organization. Asset protection can also be referred to as a variety of financial planning intended to guard assets against creditor rights. Individuals and business units use asset protection techniques to restrict creditors’ access to some reliable assets while promoting such assets within the bounds of debtor-creditor law.
Asset protection benefits include authorized insulation of assets without engaging in the illegal practices of concealment (hiding of the assets), contempt, fraudulent transfer (as defined in the 1984 Uniform Fraudulent Transfer Act), tax evasion or bankruptcy fraud. Authorities suggest that effective asset protection starts before a claim or liability occurs since it is usually too late to initiate any worthwhile protection after the fact.
Some conventional methods for asset protection include asset protection trusts, accounts-receivable financing, and limited family partnerships. If a debtor has some peculiar types of assets (e.g. short-term assets), liquidation may be considered the more desirable way than establishing a plan for asset protection. If important assets are concerned, proactive asset protection is usually recommended. Certain assets, such as retreat plans, are free from creditors under United States Federal Bankruptcy and Employee Retirement Income Security Act of 1974. Besides, many states allow exemptions for a specified amount of home equity in a primary residence and other private property such as apparel. Every state in the U.S has laws to protect owners of companies, limited partnerships, and limited liability corporations from the entity’s liabilities.