While owning a business can be personally and financially rewarding, it also has its risks, including the potential for legal liability. Without careful asset protection planning, a lawsuit can cause disaster for your business and the personal assets you have worked so hard to accrue. Fortunately, options exist that allow you to shield important assets from the reach of creditors. A Florida asset protection lawyer at Kramer Green can evaluate your situation and determine the best forms of asset protection for you.
Creating a Business Entity for Asset Protection and Not Maintaining It
Establishing a business entity to separate your personal assets from your business can be an excellent asset protection strategy. A properly formed and maintained corporation or a limited liability company (LLC) can limit a creditor’s reach to your business assets and protect your personal assets properly. However, suppose you fail to follow the operating agreement for your LLC, maintain corporate books and records, or hold an annual meeting as required. In that case, you risk having a legally invalid business entity that will not shield your assets effectively.
Using a Trust Incorrectly
A trust can be a good means of asset protection if you use the right kind of trust and you fully fund the trust. However, you can make many mistakes while establishing and funding a trust that can leave your assets vulnerable. For instance, a revocable trust will not protect your assets from creditors since you can change the terms of the trust at any time during your lifetime. On the other hand, an irrevocable trust can be effective in protecting your assets.
Likewise, some people create a trust and then forget to fund it or transfer any assets to it. They also may purchase additional assets in the future and fail to title them in the name of the trust. Leaving assets outside the trust makes them vulnerable to creditors.
Fraudulent transfers occur when you transfer assets out of your name and to a third party to delay or prevent the ability of a creditor from reaching them. Under Florida Statutes Chapter 726, creditors can sue to undo fraudulent transfers if they occurred within the past four years. For example, suppose a court finds that you intentionally and fraudulently transferred an asset to hide it from creditors. In that case, the court can undo the transfer and allow the creditor access to the asset to satisfy any debts you owe. Some factors that the court might consider in determining whether a transfer was fraudulent are whether you transferred the asset to a family member, whether you transferred the asset for fair market value, whether you maintained any control over the asset after the transfer, and whether you were left insolvent after the transfer.
Making No Advance Asset Protection Plans
Individuals often believe they have insufficient assets to necessitate an asset protection plan. In addition, they may think their estate plan is adequate to protect their assets after death, so no further action is necessary. Finally, they may believe it is too late to consider asset protection.
All individuals can benefit from an asset protection plan, no matter the amount of assets they own. For example, since neither Medicare nor private health insurance pays for the costs of long-term care, any assets that a person owns can disappear very quickly if long-term care becomes necessary and asset protection is not already in place well in advance of the need. Similarly, it takes only a single lawsuit to wipe out a large number of assets quickly, and last-minute transfers to try and avoid creditors are likely to be seen as fraudulent.
Furthermore, wills and estate plans only become effective upon your death. Therefore, that type of planning will do nothing to protect your current assets from the reach of creditors.
Finally, there is always time to stop and have an experienced asset protection attorney evaluate your situation. In many cases, you will find that there are still steps you can take to protect your assets.
Allow Us to Assist You with Your Asset Protection Needs Today
An asset protection attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. can provide you with the assistance that you need to protect your personal and business assets from creditors. We know how to provide you with the maximum asset protection available to safeguard the wealth that you have worked to accumulate over time. Call us today at (954) 966-2112 or contact us online to set up a time to discuss your legal issues with our experienced asset protection lawyers.