Asset protection is a critical aspect of estate planning for individuals with substantial wealth or those engaged in professions with a higher risk of lawsuits. It involves actions to safeguard your assets from potential creditors, lawsuits or other unforeseen circumstances. When you start your asset planning, however, can be equally important.
The timing of asset protection strategies helps ensure that a court will not rule against them, particularly if your actions come across as an attempt to hide assets from creditors.
Understanding fraudulent transfers
To understand how and when to implement asset planning without giving a court cause to doubt your efforts, it can help to learn what Florida law says about fraudulent transfers. One type is actual fraud, which occurs when the person making the transfer is aware that the transfer will make it more difficult for the creditor to collect on a debt, and they intend to defraud, delay or hinder the creditor.
Constructive fraud is another kind. This takes place when the party receiving the transferred property does not provide reasonably equivalent value in exchange. Also, the person making the transfer is insolvent or will become insolvent as a result of the transfer.
Proactive asset protection planning
By implementing asset protection strategies well in advance of any potential liabilities or lawsuits, you stand a better chance of putting an effective plan into place. Common asset protections include creating trusts or family limited partnerships to place your wealth.
It can also be helpful to maintain records of all financial transactions and the rationale behind any asset transfers. This can help show that your transfers were part of an estate plan. It may also prove that you paid off debts, which could come up as a point of contention in any probate contest.
Asset protection is a vital component of estate planning, but it is something you should approach proactively and in compliance with applicable laws. Fortunately, you can implement strategies to safeguard your assets for your intended beneficiaries while also avoiding court battles with disgruntled creditors, or other forms of legal trouble.
