Asset Protection


DEFINITION of 'Asset Protection'

The concept of and strategies for guarding one's wealth. Asset protection is a type of planning intended to protect one's assets from creditor claims. Individuals and business entities use asset protection techniques to limit creditors' access to certain valuable assets, while operating within the bounds of debtor-creditor law.

Asset protection helps insulate assets in a legal manner - without engaging in the illegal practices of concealment (hiding of the assets), contempt, fraudulent transfer (as defined in the 1984 Uniform Fraudulent Transfer Act), tax evasion or bankruptcy fraud. Experts advise that effective asset protection begins before a claim or liability occurs, since it is usually too late to initiate any worthwhile protection after the fact. Some common methods for asset protection include asset protection trusts, accounts-receivable financing and family limited partnerships.

BREAKING DOWN 'Asset Protection'

In general, if a debtor has few assets, bankruptcy may be considered the more favorable route. If significant assets are involved, however, proactive asset protection is typically advised. Certain assets, such as retirement plans, are exempt from creditors under United States federal bankruptcy and ERISA (Employee Retirement Income Security Act of 1974) laws.

In addition, many states allow exemptions for a specified amount a home equity in a primary residence (homestead) and other personal property (such as clothing). Each state in the United States has laws to protect owners of corporations, limited partnerships (LPs) and limited liability corporations (LLCs) from the entity's liabilities.

  1. Judgment

    A court order to the loser of a lawsuit to pay the winner a specified ...
  2. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  3. Asset

    1. A resource with economic value that an individual, corporation ...
  4. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  5. Limited Liability Company - LLC

    A corporate structure whereby the members of the company cannot ...
  6. Accessory Dwelling Unit (ADU)

    A legal and regulatory term for a secondary house or apartment ...
Related Articles
  1. Personal Finance

    Pros And Cons Of Offshore Investing

    Tax loopholes are shrinking, but there are still plenty of viable prospects. Get the big picture.
  2. Trading Strategies

    Benefits Abound For Active Traders Who Incorporate

    Trading through a separate business structure allows active traders access to all of the tax mitigation and asset protection strategies available.
  3. Options & Futures

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  4. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  5. Retirement

    5 Reasons Retirees Are Upsizing Instead of Downsizing Their Homes

    Many retirees opt to downsize to save money, but there are many who are doing the opposite and upsizing.
  6. Home & Auto

    Is Making Biweekly Mortgage Payments A Good Idea?

    Some people believe making mortgage payments every two weeks, as opposed to once a month, can chop years off of a home loan. But is it really a good idea?
  7. Credit & Loans

    Try This Home-Equity-Line-of-Credit Hybrid

    This product is essentially a home-equity loan and home equity line of credit (HELOC) hybrid, and it has its own quirks, benefits and drawbacks.
  8. Home & Auto

    Why You May Not Be Ready To Buy a Home

    Many dream of home ownership, but the timing should be right. There are a host of reasons why you may want to put off homeownership for awhile.
  9. Home & Auto

    The Smartest Way to Tap Your Home Equity

    Using your home as a source of funds can be a smart choice in some situations. Just be sure to carefully run the numbers.
  10. Home & Auto

    Buy a House in the Philippines: A How-To Guide

    Foreign-ownership regulations make it a little tricky, but plan right and you can have a home in paradise.
  1. Why is Luxembourg considered a tax haven?

    Luxembourg has been the tax haven of choice for many corporations and mega-rich individuals around the world since the 197 ... Read Full Answer >>
  2. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  3. How do I calculate how much home equity I have?

    Even though it is normally assumed most people know their home equity, many are still confused about the topic. It is an ... Read Full Answer >>
  4. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  5. What are some examples of financial markets and their roles?

    Some examples of financial markets and their roles include the stock market, the bond market and the real estate market. ... Read Full Answer >>
  6. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
Trading Center