Protecting Your Assets from Lawsuits

Asset protection is a method used to safeguard your financial resources from potential creditors, lawsuits, and even your spouse. The need for asset protection is more significant than ever, especially in these unprecedented times when individuals are often faced with unanticipated events that can have profound effects on their finances. To help mitigate the risks associated with these events, individuals often turn to wealth solutions firms like Ora Partners.

These firms specialize in providing asset protection strategies that enable individuals to safeguard their assets in the form of real estate, stocks, businesses, and other resources. The methods used by such firms include the establishment of limited liability companies, offshore trusts, and family partnerships. These strategies can help individuals protect their assets while also legally and ethically minimizing tax obligations.

Why Do You Need Protection from Lawsuits?

To put it bluntly, if you lose one lawsuit—one filed by a creditor, for example, seeking to recoup the money you owe—you face the loss of assets such as your car, your home, and money in your checking and savings accounts. In addition, a lawsuit can siphon money for legal fees, cause stress, damage your reputation, and gobble up your time and energy.

Really, the key to asset protection is doing it in advance, and the longer you can do it in advance of a lawsuit, the safer your assets will be.

How to Protect Assets

The approaches to protecting your assets are as varied as the assets themselves. Here are two ways you can shield your assets from a court judgment.

Limited Liability Companies (LLCs)

A limited liability company, or LLC, houses the assets of a business. This legal structure can protect your assets from being seized by creditors. In other words, your car, home, or bank account would be safe from creditors, while your business assets in an LLC typically would not be safe.

An LLC is like a financial manhole cover. You can put it on top of your assets, and if something unexpected occurs with your assets, that liability is not going to bubble up and affect your other assets.

Offshore Trusts

Though not very common, offshore trusts may be a good option for some segments of the population. For instance, a tool you can use to protect your assets is an asset protection trust in the Cook Islands, a nation made up of islands and atolls tucked between Samoa and French Polynesia.

It is an offshore trust that allows individuals to keep ownership of their assets so they can still use and enjoy their property. However, the control of the trust is held outside the U. S. so that the settlor (the party who creates the trust) is not subject to losing their assets due to U.S. court decisions. An important note: This is not about avoiding your debts to the IRS. You still need to pay them.

A 2013 New York Times article called the Cook Islands a “global pioneer in offshore asset-protection trusts,” offering a great deal of security and anonymity for U.S. citizens trying to protect their assets from legal claims.