Basics of ASSET PROTECTION

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In this video I'll introduce the basic ideas behind Asset Protection. Here are the highlights...

So, what exactly is asset protection? Simply put it’s a collection of legal and financial strategies that protect your money and your possessions. Protect from what you ask? Lawsuits. We live in a very litigious society, and the truth is that virtually anyone that has anything to lose needs to consider some form of asset protection.

Now you may say: I have insurance to protect me, and it is true that insurance is the first line of defense and the most basic form of asset protection. What if, however, you lose a judgment that is higher than your coverage, or get sued for something you aren’t even covered for, or get sued several times? In all these cases, insurance may not be enough. It’s also a reactive approach. The main purpose of asset protection is to discourage others from suing you in the first place, making it a proactive approach.

Asset Protection Approach #1: INSURANCE
The specific insurance we are talking about here is having an umbrella policy that is relatively affordable and can cover you up to $1, $5, and even to $10 million and beyond. This sort of coverage should protect your assets if you get sued after someone trips and falls on your property, or your dog bites someone, and not surprisingly many homeowners have these policies and they are very much a good idea to have as a bare minimum in protection.

Asset Protection Approach #2: EXEMPT ASSETS
These are assets that, by law, can’t easily be touched by a lawsuit judgement, and the strategy lies in having a large percentage of your wealth tied up in these. What specifically has statutory protection? It is primarily your home, which is protected under what is called a homestead exemption, which is a state level legal provision designed to protect the home’s equity from unsecured creditors.

Asset Protection Approach #3: PROTECTIVE ENTITIES
Specifically, you need to set up Limited Liability Corporations in order to shield your personal assets from any liabilities your businesses may encounter. The way to use this effectively is to compartmentalize, and set up LLCs for any and every money making business you own. 401(k)s, IRAs, Pensions, and Life Insurance are also protected entities.

Asset Protection Approach #4: EQUITY STRIPPING
a strategy that seeks to reduce overall equity in an asset to make it unattractive for anyone trying to sue you. The owner encumbers the asset – typically a property - with so much debt that it becomes valueless to anyone seeking to include it in a judgment payoff. Control, however, is never relinquished, and the owner continues to get beneficial use out of the property. You can also remove equity from cars, boats, and aircraft by leasing, instead of owning, them.

Asset Protection Approach #5: ASSET PROTECTION TRUSTS (APTs)
APTs come in two flavors, the Domestic Asset Protection Trust or DAPT, and the Foreign or Offshore Asset Protection Trust, or FAPT. They have a lot in common, with the key difference being where they are located. A properly set up DAPT is what is called an irrevocable trust. It is essentially an account that you then deposit cash and securities into that you want to protect. A trustee is then assigned to oversee and administer the trust, but you no longer have ownership of it, only the right of beneficial use that I mentioned earlier.

DISCLAIMER
This video was created for informational and educational purposes only, and should not be construed as a source of specific investing, financial, accounting, or legal advice. This video should never be used as the sole source of information, without consulting with a financial or legal professional to determine what may be best for your individual needs. The creator of this video, Elliot J. Gindis, does not make any guarantee or other promise as to any results that may be obtained from using the information in the video. To the maximum extent permitted by law, the creator of this video disclaims any and all liability in the event that any information, commentary, analysis, opinions, advice, and/or recommendations contained in this video prove to be inaccurate, incomplete, or unreliable, or result in any financial or other losses.