What is Asset Protection Planning?
Asset Protection Planning, in general, has to do with the protection of assets from potential creditors. The potential creditors could be from future lawsuits, divorces, and even bankruptcy.
So if I do an asset protection plan, does that completely protect me from lawsuits and other creditors?
Asset protection planning is not a magic shield against all possible threats to your assets. It often can make assets less attractive to creditors and facilitate the settlement of disputes. It may make collections by judgment creditors a practical impossibility. It’s best not to think of asset protection planning in absolute terms, and no lawyer can ever offer a guarantee of any kind.
In many instances, however, asset protection planning can protect financial legacies.
But my Revocable Living Trust already has asset protection, right?
A revocable living trust does not usually have asset protection built into it for the people creating the trust. An Islamic Estate Planning Attorney would draft such trusts using Islamic Inheritance rules. Such a trust can include asset protection features for future generations or a surviving spouse. However, by design, such documents are the modern-day equivalents of a will and power of attorney. Revocable living trusts are death and incapacity documents and not asset protection plans.
It would be incorrect to say trusts do not provide asset protection. An Islamic Estate Planning attorney can design trusts to protect assets.
What does an Asset Protection Plan look like?
It depends on an individual’s goals and financial situation. Certain assets may already have some asset protection; for example, shares in corporations limit your liability to the amount you spent for those shares. Certain retirement assets have federal and state law protections against creditors.
For most people, asset protection looks like a combination of business entities, trusts, and other organizations and techniques.
Does this involve hiding money?
No. Asset protection planning has to do with legal means to protect wealth from lawsuits. There is no need to lie to anyone or hide anything. Those tactics cause needless risks and are not a solution to anything.
Can I do asset protection planning when someone sues me or threatens to sue me?
All states have statutes on “fraudulent conveyance” or “voidable transactions.” Doing asset protection during such periods can sometimes be possible, but tread carefully. There are civil and criminal penalties for engaging in certain kinds of activities and having good legal advice will be especially helpful.
Who needs asset protection planning?
Anyone with a concern about potential lawsuits should consider asset protection planning. Some people are far more likely to place their wealth at risk as part of functioning in their business and profession. Individuals with professional liability (like malpractice) risk and business owners will likely need to consider asset protection more actively than wage earners that do not conduct activities that will cause personal liability.
Do Corporations protect against personal liability?
Corporations do provide a valuable shield against liability associated with the company. An owner of corporate stock generally is protected from losing more than his or her investment. However, everyone is always at risk for personal liability for their actions. In addition, there is “outside-in” liability. That is to say, an individual’s corporate stock is usually not protected from lawsuits that have nothing to do with the corporation. Say, for example, a car accident or professional liability.
Can Trusts be used to protect assets?
Several US and international jurisdictions offer “asset protection trusts.” An attorney can design such trusts to protect assets from out-of-state creditors. Trusts can be drafted in every state to protect assets, though many are not called “asset protection trusts” and do not rely on explicit asset protection statutes.
Does Asset Protection need to follow any Islamic Rules?
Yes. Asset protection planning brings up complex relationships relating to ownership, beneficial interest, and succession. Islamic issues will be involved in all of these areas, including Islamic inheritance rules.
How much does asset protection cost?
Asset protection is more of a concept with a wide range of solution sets for people who want to protect their assets. Islamic Estate Planning Attorney Ahmed Shaikh charges by the hour, and some solutions take relatively little time, while others may take more. Ahmed Shaikh charges $680 for attorney time and $100 for paralegal time. There may also be costs involved. Ahmed Shaikh can provide an estimate of the time spent on the project. Time-based billing allows for transparency and flexibility and can fit within many budgets.
To schedule a mini-consultation with Islamic Estate Planning Attorney Ahmed Shaikh, click here.