Asset Protection Planning Checklist

Lawsuits can arise from many sources, such as business activities, operation of a motor vehicle, and ownership of real estate (including property with a Marcellus Shale gas lease). Today our society is more litigious than ever before. However, many individuals give little thought about safeguarding their assets from possible future litigation.

Asset protection planning is risk management planning. It is designed to discourage a potential lawsuit before it begins or to promote a settlement that is most favorable to the defendant. The primary goal of asset protection planning is to avoid or minimize litigation with little or no loss of personal wealth or disruption to a business or professional practice. However, such planning can not be a means to engage in fraud of creditors or to conceal assets from creditors.

The following is a list of questions which you should ask yourself:

  1. Are you aware of the “traditional” asset protection arrangements available under state law, and the limitations of each of them? These include: (i) owning property in joint names with your spouse; (ii) holding assets in qualified employer-provided retirement plans and individual retirement accounts (IRAs); and (iii) using life insurance policies and annuities.
  2. Have you sought the advice of an experienced insurance consultant to conduct an insurance adequacy analysis for you personally and for your business?
  3. Do you know how trusts can be used to increase asset protection?
  4. If you own investment real estate, is it owned in a manner that will minimize your personal exposure to any uninsured risks relating to the real estate?
  5. Is your business properly structured to minimize your personal exposure to the claims of any present or future creditors of the business?
  6. Have you properly structured your business to minimize exposure of assets of the business to the claims of any present or future creditors of the owners of the business.
  7. Have the owners of your business entered into a well written shareholder agreement, partnership agreement and/or operating agreement with protective asset protection provisions?
  8. Have you separated your business or investment assets into separate legal entities to protect one group of assets from the risks relating to another group of assets?
  9. Do you regularly follow certain formalities in the operation of your business, such as keeping separate books and records, having a separate business bank account, not intermingling business transactions with personal transactions, executing legal documents in the proper manner and keeping regular minutes?
  10. Do you know how to structure asset transfers in a manner which will minimize exposure to applicable fraudulent conveyance laws?
  11. Do your estate planning documents contain provisions designed to protect assets passing to your spouse, children and future generations from being exposed to their creditors?

Asset protection planning involves a number of areas of law, including, business law, estate planning, taxation, litigation, bankruptcy, real estate law and divorce law. Therefore, our firm has taken a multi-disciplinary approach by forming an asset protection planning group which includes attorneys with expertise in a number of different areas of law. Please contact our office if you want to discuss any of the above questions or want to learn more about asset protection planning.

Questions Every Business Must Ask

Q. Has your business recently reviewed its legal structure to determine whether it is set up in the most advantageous manner for legal and tax purposes, considering recent developments and changes in the law?

Q. Do the owners of your business have a current, updated buy-sell agreement which controls how ownership interests in the business are to be transferred in the event of an owner’s death, disability or termination of employment?

Q. Have the owners of your business developed a succession plan to define how ownership and authority will transition upon the death or retirement of the present owners?

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