What would happen to your real estate or your bank accounts if someone sued you and won the lawsuit? If you did not have an asset protection plan already in place, it’s likely that the person who won the lawsuit against you could take your real estate or your bank balance in payment of the judgment.
In today’s economic climate, many people don’t find out that they needed asset protection planning until it’s too late.
Asset protection planning is the process of keeping your property safe in the event of a lawsuit. When someone sues you and wins, that person becomes your “judgment creditor”. And people can be sued for lots of reasons. If you’re in a car accident, for example, you could be sued for negligence. It’s also common for people to be sued over credit card or other types of debt.
Once someone becomes your judgment creditor, they can come after your property to satisfy the amount of the judgment they’ve been awarded. Asset protection planning takes property that once was subject to the claims of creditors and turns it into property that creditors can’t access.
Part of the trick of asset protection planning is that you can’t wait until a lawsuit is looming to start the process. By then it’s too late. Transferring an asset out of your name in an attempt to delay or hinder a creditor is prohibited by state law, and this type of transaction can be undone by the court.
Your best bet is to start early, and consult with an estate planning attorney to find out if asset protection planning is right for you.