Asset Protection

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Employee Retirement Income Security ...

    The Employee Retirement Income Security Act of 1974 (ERISA) protects ...
  2. Asset

    1. A resource with economic value that an individual, corporation ...
  3. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
  4. Judgment

    A court order to the loser of a lawsuit to pay the winner a specified ...
  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. Pros And Cons Of Offshore Investing
    Personal Finance

    Pros And Cons Of Offshore Investing

  2. Benefits Abound For Active Traders Who ...
    Trading Strategies

    Benefits Abound For Active Traders Who ...

  3. Asset Protection For The Business Owner ...
    Options & Futures

    Asset Protection For The Business Owner ...

  4. 10 Steps For First-Time Home Buyers
    Home & Auto

    10 Steps For First-Time Home Buyers

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center