Yahoo’s recent article entitled “How to Protect Your Money, Even If You’re Not Rich” says that contrary to what many believe, asset protection planning isn’t just for the wealthy. The estates of anyone in any income group can be sued or suffer from hefty taxation.
The following strategies can mitigate the effect of creditor claims and other issues on your wealth.
You should be proactive if you want and need to protect your assets. However, if you have significant debt and few assets and are subject to a lawsuit, filing for bankruptcy may be better than creating an asset protection plan.
That’s because it’s only worth it if you have significant assets, although some events cannot be protected against. These include tax liens, mechanics liens, alimony judgments, and child support claims.
A plan benefits these people the most:
- Anyone with a significant amount of assets.
- Anyone with a significant, recurring amount of credit card debt.
- Homeowners underwater on their mortgage (your mortgage balance is greater than the value of your home).
- Anyone whose profession carries a high probability of liability, such as doctors and attorneys.
Some assets aren’t subject to creditors, such as retirement accounts under the protection of the Employee Retirement Income Security Act of 1974 (ERISA).
You may also legally preserve at least a portion of your home equity.
An asset protection plan aims to set legal separation between you and your assets. This allows you to legally shelter your assets from creditors without doing anything illegal.
Reference: Yahoo! (Nov. 6, 2022) “How to Protect Your Money, Even If You’re Not Rich”