Ask any High-Net-Worth-Individual (HNWI) about their significant concerns, and they’ll likely express their anxiety around asset protection. In the world of the rich, not everything is glittery. The HNWIs are anxious to lose their assets in a legal crossfire with the creditors. So, they expend much of their time and energy on asset protection strategies.
Tactical measures are necessary for the strategic control and protection of assets. Creditors are persistent, and so should you be. Learn from HNWIs about how they undertake asset protection through several measures. Today we will explore what’s important for you and your assets.
- Safeguards Against The Spouse’s Creditor
Separation or divorce leaves a bad taste in the mouth. Well, that’s going easy on the consequences that follow. In the world of the wealthy, marriages are always a matter of public scrutiny–and divorces are even greater still. And what spices up everything is the financial pandemonium that comes along with it.
Of course, not all marriages end up in divorce; not all marriages are happy ever after. In either case, you’d want to protect your assets from the creditors of your spouse. In fact, your own creditors may harass your spouse or ex-spouse, whichever the case may be. Thus, it is best to enter into a pre-nuptial agreement that is explicit regarding the same.
- A Business Trust is Trustworthy
To secure your assets and prevent creditors from seizing them, it is quite an idea to establish a business trust. It is not a novel suggestion, of course, but the idea has usually worked for generations.
Every trust comes with an objective. You can become the beneficiary of the trust. Make the trust the sole owner of the property that forms part of it. If you have a family member who can become a co-trustee, sign him up too. With unalterable ownership, creditors won’t be able to arbitrarily gain access to them.
- Limited Liability Company
An LLC is an effective way to minimize business liabilities and ward off creditors from asset control. In a typical LLC setting, the owners are distinct from the entity. This means the owners cannot be held liable for the debts of the company even if they are the sole owners.
Now, if your assets belong to the company, creditors cannot claim seizure of those assets since they are not legally yours. However, this doesn’t work if the debt is tied to the company.
- Initiate transfer to heirs
Firstly, be careful while agreeing to anything with creditors. It is best if you don’t pass on the liability to your heirs in case you fail to discharge it.
Secondly, if you’re anxious already, it is best you transfer assets to your heirs or the most trusted individuals in your life. Creditors will not be able to make claims on those assets since they aren’t yours anymore. That being said, this is a highly risky move since many states in the US consider it a fraudulent practice and regulate it.
- Offshore accounts
Now, such a move will surely invite scorn, especially when a global crackdown on offshore tax havens is underway. Nevertheless, offshore registration of property is quite in vogue. Creditors won’t be able to get their hands on the property. At the same time, you’ll be able to save on taxes.
Of course, this strategy doesn’t come with its own drawbacks. If you lose the lawsuit against creditors, repatriation orders can be made to return the assets to the country.
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