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Asset protection planning involves making smart decisions today to protect yourself, your business, and your hard-earned assets from loss due to lawsuits, creditors or bankruptcies. This type of legal planning is especially important for professionals and business owners, whose personal assets could be at risk due the nature of their employment.
Unfortunately, we live in a very litigious society. We all know that the number of divorces, lawsuits, and bankruptcies has increased steadily over the past few decades. Over 50,000 lawsuits are filed in the United State every day. While no one expects that lightning will strike them, wealth created through a lifetime of work, saving and investing can be lost in a moment if these types of man-made lightning do strike. To protect your assets from such a disaster, proper asset protection strategies should be carefully considered. They include safeguarding assets from the claims of creditors, limiting liability through legal entities, and transferring risk through insurance.
For such planning to be effective, you will need the help of an experienced asset protection attorney sooner rather than later. It is important to note that asset protection is only effective against future, not present creditors.
The term “Asset Protection Exemptions” refers to the various assets that are protected by Missouri law from most or all creditors after a judgment or bankruptcy filing. Asset protection and bankruptcy attorneys usually refer to these as statutory exemptions. They are available to any Missouri resident and operate independently from corporation, LLC, and trust laws. Each statutory exemption limits the remedies available to a court when attempting to seize assets from a debtor (the person who owes the money to a creditor).
Statutory exemptions fail to provide much peace of mind to someone interested in protecting assets from future creditors. The exemptions are intended to protect essential assets only as defined by public policy. True asset protection planning does not rely solely on statutory exemptions. Some exemptions rely on case law, which is subject to change over time. Many exemptions are Missouri-specific, so persons moving out of Missouri – or beneficiaries who inherit from Missouri residents – may not have the same protections.
Missouri exemptions are not particularly generous compared with the exemptions offered by many other states. These are some examples of statutory exemptions in Missouri:
Many entrepreneurs operate their businesses as sole proprietors rather than through a legal entity, such as a Corporation or a Limited Liability Company. Whether their business is home-based or in the Fortune 500, these business owners are attracted by the informality of a sole proprietorship. They also do not want to incur legal fees to create and maintain a legal entity. However, in addition to other advantages, conducting business through a legal entity may offer substantial risk management benefits.
While lawsuits brought against a sole proprietorship are really lawsuits against the owner’s personal assets, lawsuits against a properly created and maintained legal entity are really lawsuits against the entity’s assets. The selection of an appropriate legal entity is critical for managing your risk. Consider transitioning your business activities to a more formal entity, such as an LLC or a corporation to limit the business risks to the business itself. This move can shield your personal assets.
When was the last time you reviewed the details of your liability insurance program with your insurance professionals? Are your policies current? Are the coverage limits adequate and are the deductibles reasonable? Have you scrutinized the policies for loopholes?
Look into a personal umbrella liability policy that will cover you in most any situation that might happen. Umbrella coverage provides extra liability insurance to cover injuries, damage to property, lawsuits, and other personal liability situations. Make sure that you purchase enough, at least equal to your net worth.
Remember: the fundamental philosophy of any insurance coverage is to pay a premium you can afford to transfer a risk you cannot afford. Asset protection planning includes taking time to understand both the risks you have retained and the risks you have transferred.
PlaskettLaw, LLC assists clients, their businesses, and their families in protecting their assets from future creditors and lawsuits through the implementation of a wide variety of legal tools. Contact us today to schedule a free initial consultation to discuss asset protection strategies that may be helpful to protect your assets from future potential creditors and lawsuits.