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Asset Protection

What is an asset protection attorney?

At its most basic, an asset protection attorney helps individuals shield the assets they’ve worked long and hard to accumulate from creditors of many stripes. The term “creditors” is used quite broadly and can encompass anyone from former spouses involved in a divorce case, plaintiffs in lawsuits, disgruntled employees and others who feel they have a claim to your money. An asset protection lawyer can preserve assets by minimizing estate, gift and income taxes. The ultimate goal in every case being to ensure that you and your loved ones hold on to as much of your money as possible.

Who are you protecting assets from?

Problems rarely announce themselves in advance and it is usually the case that costly scenarios that could threaten your financial future may not be known ahead of time. It is for this reason that asset protection planning is so important. It allows individuals to prepare for the possibility of future trouble. This trouble could be in the form of an expensive divorce or alimony award, a malpractice lawsuit from an injured patient, a personal injury lawsuit from a stranger or even a hefty estate tax bill from the IRS. In each case, asset protection planning exists to get out in front of the problem, preparing you for whatever risks may lurk down the road.

What are some common risks?

As almost anyone who follows the news understands, America is an especially litigious country. The risks of being involved in a lawsuit aren’t abstract; they are all too real. Simple negligence can lead to financially destructive lawsuits. Car accidents, slip and fall cases, employee claims, etc. could all result in massive verdicts that could undo a lifetime of hard work. The likelihood of being involved in such a costly claim increases dramatically for those in certain careers, especially small business owners or physicians. In many cases, the judicial system is structured such that there are few if any drawbacks to moving forward with a lawsuit, regardless of how frivolous it may be. Massive verdicts encourage a lottery mentality among plaintiffs, with many hiring lawyers on contingency who are willing to roll the dice.

Who should consider asset protection planning?

Previously, asset protection planning was used primarily by those in high-risk careers (like doctors) or those who frequently engaged in high-risk activities. Now, given the risk of lawsuits and the increasing complex tax and estate planning laws, asset protection planning is something that can benefit a wide swath of families. Anyone who has assets that they don’t want to risk losing should consider meeting with an experienced South Carolina asset protection attorney to discuss possible options for securing your future.

Timing is crucial

As with many things, timing is important. Asset protection planning only works if you take action early. If you wait, for instance, until a creditor has already gone after your assets, it may very well be too late to effectively shield them. If you think you are a candidate for asset protection planning, you should reach out to an experienced South Carolina attorney early so you can begin laying the foundation for a stable and secure future asset protection plan. Doing so early ensures you are ready if and when a problem arises.

Asset Protection Strategies

Asset protection planning can take a lot of forms; one common example is a marriage between asset protection and estate planning. Asset protection occurs when estate planning is done with an eye towards structuring an individual’s affairs in a way that reduces taxes and preserves the maximum amount of resources for surviving family members. This is done by asset protection attorneys by creating trusts and other entities. The goal of these trusts and other estate planning vehicles is to shield assets from income, estate or gift taxes. These taxes can eat away at even large amounts of money, leaving much less behind than you intended.

Beyond protecting the assets for the beneficiary, these tools can also be used to protect the assets from the beneficiary. Trusts are managed by trustees and avoid the potential risk that comes with giving large sums of money directly to beneficiaries who may not be old enough or wise enough to make sound financial decisions. These strategies shield the assets from the beneficiaries by adding an additional layer of oversight, preventing them from being depleted too quickly.

Another function of a trust is to protect beneficiaries from the possibility that creditors could reach assets left to them by a loved one. A beneficiary’s creditors usually cannot seize the assets inside a trust. This can be especially useful when leaving money to married children. By protecting the assets in a trust, you avoid the risk that a future divorce might see your child’s former spouse walk away with half of your money, a common worry among parents eager to guarantee the security of their children. 

Business Asset Protection

Beyond estate planning measures to protect assets, another common approach of asset protection attorneys is to secure business assets through various corporate forms. This can be done by shielding family owned businesses from creditors by setting up corporate entities that protect an owner’s personal assets. LLCs are another tool for achieving this objective and are often set up to protect personal assets from uncertain and often expensive business risks.

What’s wrong with handling asset protection yourself?

Some people assume that they can handle issues of asset protection on their own. How complicated could it be after all? Unfortunately, quite complicated. Taking action on your own in an attempt to hide assets often results in far more trouble for yourself down the road. The issue is that people with experience in asset protection could wind up running afoul of any number of laws. If any of your actions are deemed to have been intended to defraud a creditor from collecting a valid debt, then legal action can be taken to unwind these asset transfers. The law in South Carolina (and federally) is clear that purposely hindering creditors can result in declaration of a fraudulent transfer, something that can allow a creditor to undo the transaction and recover the asset you attempted to protect. Not only does this prove unsuccessful in actually shielding your assets, but it can also be quite costly, adding insult to injury. It is far better to avoid the trouble from the outset by consulting a skilled South Carolina asset protection attorney who can guide you through the process without exposing you to needless risk.

Does South Carolina law provide asset protection?

Another question that many people have is whether specific asset protection strategies are unnecessary because the law has built in protections. Unfortunately, in South Carolina very few asset protection laws exist, meaning defendants are usually exposed in the event of a lawsuit. South Carolina has a relatively paltry homestead exemption, only $50,000. This means it is nearly impossible to shield your home from creditors. Federal laws exist to shield assets that are located in certain retirement plans, such as pensions and profit sharing. However, assets in IRAs receive only minimal protection under South Carolina law. Finally, life insurance proceeds paid out to a spouse or children are also protected from claimants in South Carolina. The few categories that are specifically protected demonstrate how many others are not. It’s for this reason that asset protection planning is so important, to pick up where the law leaves off.

What area of the law does asset protection involve?

People understand that criminal defense attorneys should understand criminal laws and that divorce attorneys should be well versed in family law. But what about those lawyers engaged in asset protection planning? Given the complicated nature of asset protection, it is crucial that attorneys have both a breadth and depth of knowledge. Beyond possessing a deep understanding of estate planning techniques, a good asset protection lawyer will also have a working knowledge of tax and business law. Lawyers should be familiar with concepts in bankruptcy law and creditor/debtor laws. Finally, to be sure that no protective strategies run afoul of the law, fraudulent conveyance laws must also be fully understood.

What to keep in mind

As we already mentioned, when it comes to asset protection planning, timing is absolutely critical. Waiting too long to begin your asset protection planning is a common and, sadly, entirely avoidable mistake. You must plan in advance so that when something goes wrong you are ready for it. Attempting to transfer assets after a lawsuit is filed or a costly event occurs is almost always too late and may event set the stage for allegations of fraudulent conveyance. Now is the time to start thinking about asset protection.