Asset protection is a process that involves organizing an individual’s financial affairs in such a way as to protect assets from the risk of exposure. Without asset protection, an individual’s assets may be in an unprotected form of ownership. For example, they may own property that is in their name or even the name of a revocable living trust. With asset protection, the individual’s assets then become a little more hidden and not directly linked to them. This can be done through the use of certain types of trusts, limited liability companies, limited partnerships, corporations, and other such entities. Asset protection can also be a process of transferring financial affairs into exempt assets to the extent permitted by the state that the individual resides in.
Due to the types of judgments and lawsuits that exist today, a properly crafted asset protection plan can also go far in steering creditors in a different direction and causing them to look elsewhere. As a matter of fact, deterrence is a large aspect of asset protection. Usually, a plaintiff is unwilling to execute attacks against a defendant who has a strong asset protection plan.