This is a vital,
complicated area. Two principles are paramount, do all you
can in advance of a problem, and reduce your reachable worth
according to the law in your locality.
But some general principles apply, discussed here, but to
be discussed with your assett attorney.
The keys to protection are to either be too lean to
be worthwhile, or too much trouble to be worth the effort.
Regarding the first, placing assets in the names of people
you want to have them anyway, such as children, spouse, and
other family is a good tool. If you keep the assets, place
them in separate companies, such as LLC or LLP entitiies.
In those situations a creditor may attach a distuibution from
the entitity, but such distributions may not occur for a long
time, or not occur at all. They will not reach the assets
otherwise.
Some types of ownership, which are not possible in
all states, create substantial protection. If you
and your spouse are tenants in the entirity of a home, condo,
timeshare or other item, this has a strong protection as long
as you maintain it. This means each party owns all of the
home, for example. Thus it is not possible to split it for
a creditor. If you sell it together, and purchase another
the protection transfers. But check, this does not exist in
all states. Tenants in common is different and not protective.
As far as making it too difficult and too lengthy to reach
assets, under the attoneys direction, you can place assets
in a series of entities. You can encumber them with debt that
makes them of reduced value. They can be offshore where different
laws apply.
Beware of mistakes in handling assets that can place
you and they at risk. In particular, fraudulent conveyence
laws apply. The essence is that if you sell or transfer
an asset you must get fair market value for it. Fair market
value is close to the appraised value, 80% is one rule used.
This will be particularly important if any transfer or sale
occurs after your knowledge of the litigation or possible
claim.
How likely is it that you personal assets will be taken?
This is hard to estimate. It is rare apparently, but it does
occur. Even before you escape that risk, you may have
a creditor attack your credit record, which can have
serious consequences in many situations. As these cases may
take months or longer to negotiate to a conclusion, plan for
fighting this issue as well.
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