Should you protect your assets?

Read on to learn about the ins and outs of asset protection and how it can help you and your possessions.

You’ve worked hard for your assets, so make sure you protect them.

Shielding your wealth from creditors or former partners has become even more important in recent times, with the economic malaise of the last few years continuing to drag on for the foreseeable future. Whether by making a will or transferring your house to a partner, there are a number of ways you can protect your assets from either burdensome tax or litigation.

Read on to find out everything you need to know about asset protection and how it can be a crucial and beneficial part of your estate planning.

What is asset protection?

Asset protection first became a distinct legal entity in the 1970s and grew to prominence alongside offshore protection trusts as the 1980s progressed.

The process essentially involves you taking steps to protect your economic resources and keeping them safe from anybody who may wish to file a lawsuit against you. Such proceedings can be for a variety of causes, ranging from car accidents to failing to repay your mortgage or other monthly bills.

How can you protect your assets?

To shield your assets from litigation you must engage in a process called asset protection planning. This means turning your possessions from being non-exempt from lawsuits to being classified as exempt assets and therefore out with the reach of any claimants. However this process must be started before any lawsuit is filed against you, so you must have your plans laid out in advance and not merely appearing to hide your assets.

Asset protection is entirely legal and should not be confused with tax evasion or concealment scams. Ultimately your possessions are protected because you have insulated them from the claims of creditors and other liabilities by transferring their legal title. By placing them in the possession of a trust, nominee or specially chosen financial agent you can still keep control of the asset whilst enjoying unbreakable protection and peace of mind.

Asset protection is also important if you end up going into an elderly care system. Currently anyone with capital in excess of £23,250 in England and Wales generally has to fund their own care, with lower levels of assets affecting contribution levels. Many elderly people are now transferring the deeds of their house or other possessions to a family member well in advance of any medical problems to ensure they avoid some of these costs.

Many asset protection schemes make use of offshore trusts to protect people’s possessions. Countries like the Cayman Islands and Nevis have become famous off the back of such schemes and are now important financial centres. Whilst you will still have to pay appropriate levels of tax on these schemes, they are now recognised as one of the safest ways of protecting yourself against future liabilities.

Asset protection and banks

Asset protection has been featured heavily in the news over the last few years thanks to RBS’s scheme to help insure its most toxic assets. The government set up the scheme to encourage banks to keep lending by shoring up their capital base and protecting them against further losses on these assets.

In total RBS placed £325 billion of assets into the scheme, before leaving it in late 2012 as the bank’s financial health improved.

Do you use any asset protection schemes? What prompted you to decide to shield your possessions?

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