Some people want to protect assets when they are engaged in their estate planning efforts. This is a good idea for anyone who wants to feel safe and secure. However, it is an absolute must for some individuals who are particularly exposed to legal actions.
Who would be particularly exposed to litigation? We have all heard of malpractice lawsuits. Physicians do well financially, and litigious types may see a target with deep pockets.
While physicians do carry malpractice insurance, it is still possible for personal wealth to be attached under certain circumstances. This possibility can be mitigated if steps are taken to protect assets.
Real estate investors are also particularly open to legal actions. When you own investment property, you may rent it out. People who are leasing property from you may initiate legal actions for one reason or another. It is important to protect your personal assets from lawsuits.
When you are operating a business and you may be sued because of the actions that you take in the course of doing your work, you may want to create a particular type of business entity to protect assets that you own personally. The actions of the business entity would be considered separate from your own personal affairs.
One such entity that is often used is a limited liability company. If the company was to be sued, the personal property that is owned by the owner of the company would not be in play.
Another entity that is used to protect assets is the family limited partnership. As the name implies, it is a partnership comprised of family members. If you create a family limited partnership you would act as the general partner. Members of the family that you add to the partnership would be limited partners.
The general partner makes all the decisions with regard to the actions of the partnership.
Let’s say that you registered your business practice as a professional corporation in which you hold all of the stock. You place it into a family limited partnership. A legal action against the practice would not fall back on you as an individual, because the partnership owns the practice. You could simply discontinue taking a salary from the corporation to avoid attachments.
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This is a brief look at a couple of different ways that you can protect assets. Depending on the circumstances there are various different courses of action that can be taken. The optimal approach will depend on the circumstances in question.
If you would like to discuss your own unique personal situation with a licensed estate planning attorney, don’t hesitate to contact our firm to schedule a free consultation.