Asset Protection Planning
Offices in Fishers and Rockville, serving all surrounding Cities
Planning to protect your assets is often necessary in today’s world. Protection is not avoidance. It is a method to insure against loss due to a lawsuit, creditors or long-term care. This type of legal planning is particularly effective for professionals and business owners in order to control risk to their personal assets as a result of their business, and is an important tool in managing the risk of loss associated with long-term care.
As my law professor used to say, “Anyone can sue anyone else for anything at any time.” We, unfortunately, live in a litigious society in which there are a large number of people who believe everyone owes them something. Being sued is a very real possibility for anyone with assets – not just the super-wealthy.
The good news is that the law allows you to protect yourself. With proper planning, your assets can be fully protected in the event of a lawsuit or judgment. Additionally, you can plan against the potential costs of long-term care.
The important thing to remember when creating an asset protection plan is that every step of the planning process should be undertaken with the assumption that it will be scrutinized by the creditors from whom you wish to protect. Thus, sound advice from a qualified attorney is the best course of action in this area. Taking advice from your family, friends or neighbors will not give you the peace of mind you need in this complex field.
We are often asked about the moral or ethical issues associated with long-term care planning in the context of asset protection. To address these issues, consider the story of the Free Bridge as told by US Supreme Court Justice Louis Brandeis:
“I live in Alexandria, Virginia. Near the Supreme Court chambers is a toll bridge across the Potomac. When in a rush, I pay the dollar toll and get home early. However, I usually drive outside the downtown section of the city and cross the Potomac on a free bridge.
This bridge was placed outside the downtown Washington, DC area to serve a useful social service, getting drivers to drive the extra mile and help alleviate congestion during the rush hour.
If I went over the toll bridge and through the barrier without paying the toll, I would be committing tax evasion.
If, however, I drive the extra mile and drive outside the city of Washington to the free bridge, I am using a legitimate, logical and suitable method of tax avoidance, and am performing a useful social service by doing so.
For my tax evasion, I should be punished. For my tax avoidance, I should be commended.
The tragedy of life today is that so few people know that the free bridge even exists.”
Asset Protection Planning is the Free Bridge.
Exempting Assets in Indiana
State and federal laws exempt some of your assets from the claims of creditors. While some states allow you to choose either the state or federal exemptions, in Indiana you must use the state exemptions and federal bankruptcy exemptions are not available.
Once you have identified the protected asset classes available to you under applicable law, it may be prudent to maximize your protection by converting non-exempt assets into exempt assets.
Limiting Liability for Professionals & Business Owners
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 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. Nevertheless, the selection of an appropriate legal entity is critical for managing your risk.
Transferring Risk with Insurance
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? Remember: the fundamental philosophy of any insurance coverage is to pay a premium you can afford to transfer a risk you cannot afford. Take time to understand both the risks you have retained and the risks you have transferred.