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Common Asset Protection Myths

Wed Jan 31, 2024 | Asset Protection |

Asset protection is one of the most neglected aspects of estate planning. One of the reasons that it gets overlooked is that people don’t really understand it. Instead, they rely upon various popular misconceptions surrounding asset protection in deciding that it isn’t necessary or they don’t need it. The reality is, however, that everyone needs to worry about their assets being attached through litigation or taken by creditors. Whether you are wealthy or of more modest means, an experienced asset protection attorney can identify your asset protection needs and explain your options. 

Myth: Asset Protection Is for Older, More Established People

Asset protection is a way to guard against unexpected events such as financial crises and lawsuits. The unexpected can happen at any age. For young people, the assets you own now will serve as the foundation for your future wealth. Protecting those assets now can prevent you from having to start over later on. 

The fact is this – asset protection is for anyone who wants to protect what they have earned. A skilled asset protection attorney can identify the assets you have that may be at risk and discuss easy, affordable options for protecting them. They can also give you some asset protection strategies to consider as you continue to move forward in life. 

Myth: Asset Protection Is for the Wealthy

While it is true that the wealthy may have more assets to lose, the reality is that they also have more of a cushion – they can afford to lose more than those with more modest holdings. If you have only one significant asset, where would you be if you had to sell that asset in order to pay off a judgment that was taken against you? Losing your home, for example, could put you and your family in crisis. Asset protection can be worthwhile even for those who do not consider themselves wealthy. 

It is also important to note that many people who do not consider themselves wealthy actually have more to lose than they realize. Your home, your bank accounts, your investments, and your retirement plans are assets that you have been growing for the benefit of your family’s future. These assets can be put at risk in the event of an unexpected setback. An asset protection attorney can protect you from a financial crisis in the event that something goes wrong. The bottom line is that asset protection is for anyone who has assets. 

Myth: Asset Protection Is about Avoiding Taxes

This myth is partially true – asset protection can help you minimize your tax liabilities. Taxes can deplete the overall value of your estate. Unpaid taxes can lead to tax liens that can then be foreclosed if they remain unsatisfied. As a result, there are asset protection strategies that focus on potential tax issues,

However, the main purpose of asset protection is to protect your assets from a broad spectrum of risks including divorce, bankruptcy, business failures, and financial difficulties. For most people, their tax liability is the least hazardous of these risks. An asset protection attorney, therefore, can do a lot more than help you save money on your taxes. They can help you prioritize all of your potential risks and then develop strategies for protecting your most valuable assets. 

Myth: Asset Protection Is Unnecessary if You Have Insurance

This is another myth that is partially true. Insurance can be an important element of an asset protection plan, but they are only one piece of a comprehensive asset protection plan. Insurance policies typically only protect a single asset or only apply in the event of a specific occurrence. In addition, insurance policies always include a variety of exclusions and limitations – exclusions and limitations that went unnoticed until the critical moment that you needed coverage. 

One of the things that an asset protection attorney can do is review your existing insurance policies to determine whether they provide adequate protection. They can then recommend where you need to increase your coverage. They can also explain what your insurance policies won’t cover and whether you need to purchase additional insurance. From there, they can identify assets or occurrences that won’t be covered by insurance regardless of what happens and discuss options for protecting those assets from loss. 

Myth: Asset Protection Is Illegal or Unethical

For many people, the phrase “asset protection” signals hiding assets, bogus title transfers, and generally doing whatever they can to avoid legitimate moral and legal obligations. While people can and do find ways to hide assets illegally, there are ethical and legal avenues for protecting their assets against unexpected loss. For example, some of the most common asset protection strategies include the following: 

  • Purchasing additional insurance products or increasing coverage on existing policies
  • Using Florida’s homestead exemption law
  • Business entity formation and restructuring
  • Purchasing additional financial products
  • Creation of trusts
  • Additional funding of retirement plans

All of these strategies are legal, ethical, and transparent. Illegal or unethical means of hiding assets actually put your assets at risk of government seizure – the exact opposite of what asset protection is intended to do. An experienced asset protection attorney can provide you with an effective asset protection strategy without legal or ethical compromises. 

Contact Ellis Law Group to Protect Your Future

Asset protection is for anyone who has worked hard to earn what they have, young or old, wealthy or not. If you are married, if you have children, if you own a business or a home, if you have significant savings or investments, it is worth having a conversation about whether you need to protect your assets. An asset protection attorney from Ellis Law Group can assess your potential risks and needs and work with you to develop a cost-effective asset protection strategy that makes sense. Call us today at 561-910-7500 or complete our online contact form to schedule a consultation.