When is It Risky to Move Assets to a Protected Vehicle?

When is It Risky to Move Assets to a Protected Vehicle?

The assets you accumulated over a lifetime of hard work and dedication are at jeopardy if you face a lawsuit or unexpected credit situation. Without proper planning, these scenarios could cause you to lose everything. Asset protection allows you to transfer assets to protected vehicles to shield them from creditors and lawsuits. However, transferring assets at the wrong time can be perceived as fraud. Learning when it is too risky to move assets to a protected vehicle can help safeguard your future against the unexpected.

How Asset Protection Safeguards Your Wealth

Asset protection allows you to distribute your assets in ways that shield your wealth from creditors and lawsuits. When assets are transferred to one or more protected vehicles, they are secure from lawsuits or creditors seeking payment for debts. In most cases, people who are interested in protecting their wealth for themselves and future generations work with an asset protection lawyer to distribute assets into protected accounts or trusts.

Protected vehicles come in different forms and are usually protected from creditors and lawsuits due to the purpose of the account, or the separation of business and personal assets. Some of the most common asset protection vehicles include annuities, trusts, life insurance, retirement accounts, and business entities, such as a, corporation, or limited liability company (LLC).

When Asset Transfers Become Risky

The legal process of asset protection is not considered dishonest or fraudulent. The process reduces risk exposure and is a valuable tool for estate planning. However, transferring assets in response to a difficult financial situation can pose risks, which is why you should work with an estate planning lawyer skilled in asset protection. For example, timing is everything. Putting an asset protection plan in place before it is needed is solid financial planning, whereas distributing assets when a creditor is already involved may be considered fraudulent.

Transferring assets when a creditor is attempting to receive payment for a debt may be seen as an attempt to deceive creditors or avoid paying a debt. Similarly, if someone distributes assets to protected vehicles when they are facing a liability lawsuit, these actions may be considered an effort to avoid specific financial obligations.

If creditors can prove someone made a fraudulent transfer, the creditors may be able to have the transfer reversed and gain access to those assets to satisfy the debt. Typically, when and how an individual transfers assets determines whether the transfer is fraudulent. If a person transfers someone’s assets with the knowledge a creditor is trying to satisfy a debt, and the transfer makes the person unable to satisfy their obligations to the debtor, the action is likely to be ruled fraudulent. Similarly, if an individual sells property or other assets for less than market value, it could be considered a fraudulent transfer.

Contact a Lawyer to Discuss When It is Safe to Move Assets to a Protected Vehicle

An asset protection plan is a legal transaction designed to enable individuals to protect their wealth against creditors and lawsuits. However, it can be risky to distribute assets when your actions could be construed as an effort to deceive your creditors. Planning ahead is the best way to safeguard your assets from potential lawsuits or creditors attempting to use your assets to satisfy a debt. When you take proactive steps to transfer assets to protected vehicles, these assets will be shielded from unexpected financial disputes in the future.

Asset protection is a complex field of law that requires a personalized plan based on each individual’s unique financial situation. Contact the qualified team at Veliz & Associates, P.A., to create an effective asset protection plan and safeguard your wealth.

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