How Asset Protection Works

There are literally hundreds of different techniques to protect different categories of assets. Some are appropriate for everybody and are based on common sense (e.g. not flashing your money around or never entering into a general partnership) and others are appropriate for wealthy or soon-to-be-wealthy people (e.g. foreign asset protection trusts). Asset protection techniques also vary depending on both the type and location of property.

All asset protection techniques have one thing in common: they each make it more difficult for a creditor to either find or take assets. By implementing a properly crafted asset protection plan (which may include an asset protection trust as well as a family limited partnership) an individual can legitimately put a significant portion of his assets out of the reach of judgement creditors and still retain substantial control over these protected assets. A properly implemented asset protection strategy reduces the size of the target the plaintiff's attorney is shooting for. Once the plaintiff's attorney is convinced that any judgment will be difficult or impossible to collect his motivation fades because he is unlikely to be paid for his work. The effect of asset protection planning is the destruction of the economic incentive to litigate.