Asset Protection: Four Important Techniques

The topic of Asset Protection from creditors is an important one. The following are four general techniques you should consider when deciding how to protect your assets:

(1) State and Federal Statutory Exemptions. A number of your assets are automatically protected from creditors by state and federal statutes. For example, some states do not allow judgment creditors to attach the home of a "head of household" to the judgment. The term "head of household" applies to a person who supports either a spouse or children or both. You should consult an attorney to determine which Statutory Exemptions are available in your state.

(2) Forming a Professional Entity. Forming a Corporation, LLC, PC or other professional entity can limit your individual liability. If you own rental homes or other rental properties you may consider forming a corporation or other professional entity and placing ownership of the property into the entity. If someone is injured on the property your personal assets will be exempt from any potential judgment against the professional entity.

(3) Domestic Asset Protection Trusts. A Domestic Asset Protection Trust will allow you to protect your assets by placing them into a trust. You can name yourself as the beneficiary, but prevent potential creditors from getting at trust assets.

(4) Transmutation Agreements. Transmutation Agreements are available in community property states and effectively convert a husband and wife's community property into separately owned property for more protection.
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