What is the best way to protect your personal assets?

Asset protection is simply adopting a range of strategies to title your home, savings, real property, business, and other assets in a manner that legally shields them against lawsuits and other claims. The goal to protect one’s assets from litigants and creditors might seem apparent, yet there is more to it. Asset protection – or lawsuit-proofing, as some call it − creates a safety net. It won’t guarantee that you’ll avoid lawsuits or other financial calamities, but it can guarantee you’ll lose fewer assets if you do run into trouble.

Unless your assets are protected, you’re in ‘free-fall.’ You’re vulnerable and exposed. You can’t afford that exposure. Not with the many risks you’ll encounter. Of course, there are other threats to one’s wealth. Inflation, recession, stock market downturns, the devaluation of the dollar, and other economic risks – can also eradicate one’s wealth. But we leave the solutions to those problems to financial planners and other professionals.

A good asset protection plan does much more than just place assets out of the reach of creditors. It is an overall and comprehensive personal and business risk management strategy that furthers a variety of goals such as prompting the end of litigation or transferring the onus of wrongdoing to others. In fact, the best asset protection structure is one that simply is never challenged because litigation is avoided altogether, or contentious matters are settled prior to judgment.

It is important to understand that the fundamental purpose of the financial and legislative tools used in the preparation of asset protection is neither to cover personal or business properties nor to cheat the U.S. Government of taxes on the income earned from those assets. Rather it is protecting wealth from unexpected attacks by questionable debt holders or plaintiffs.

We provide custom-tailored asset protection services to our valuable clients residing in the USA by adhering to federal laws, state laws of the U.S., and Islamic laws. The services provided are in compliance with legal laws and regulations of the USA and also align with Islamic regulations and principles.

We at Islamic Wills Trust services provide financial services that are meant to protect and preserve your assets and pull the tension off of your shoulders.

Effective Asset Protection Strategies

We offer a diverse range of asset protection strategies that align with your present and future goals. The strategies can be worked on at any time, however, we believe in “being proactive” and thus always recommend our clients consider planning on asset protection as soon as they can. The process takes time, as on how many assets you may have and how worthy they are in monetary times. To avoid any delays, we offer proactive services where our team takes your case into consideration, calculates the worth of assets, and by the end of planning suggests the most suitable long-term asset protection strategies. Some of the ways of safeguarding your assets include:

The Corporations

Frequently, the corporation is our initial shock absorber from a lawsuit, A corporation should be considered whenever a business has one or more employees. Admittedly, it is not perfect as a suit protector but still, it is generally much better than the general partnership or proprietorship form of conducting a trade or business. Be cautious about putting real estate, stocks, bonds, and investment assets into a corporation. If the corporation gets sued, it is far better to have few corporate assets which can be seized by the judgment creditor. The S and C corporations both offer equal protection of assets.

Typically, I have the business real estate owned by a trust or a family limited partnership rather than by a corporation.

Often three corporations will be used to maximize protection. For example: Corporation #1 is the operating entity. Corporation #2 owns vehicles and equipment. Corporation #3 owns other major business assets, including any that may have high-risk or high-liability exposure.

Irrevocable Trusts

Often, an irrevocable trust is used to provide asset protection. If you want to ensure that this type of trust protects your assets, you must pay attention to who the trustee is. Is generally advisable for someone other than the husband or wife to be the trustee. Also, the typical spend-thrift and anti-alienation clauses will normally be included in the trust if suit protection is a motivation factor in the use of the “irrevocable” trust. An Irrevocable Life Insurance Trust (ILIT) is one such example.

However, the downside of using an irrevocable trust is the loss of control and flexibility to meet the demands of changing circumstances. If you were suddenly in a serious automobile accident and you required extra funds to sustain your family while recuperating, these funds may not be accessible if placed into an irrevocable trust.

The Funded Revocable Living Trust

A living trust is a trust that is established while you are alive. When you establish a living trust the title to certain property is transferred into the trust. You can retain control of the property if you name yourself as a trustee. The assets will be used for the benefit of the named beneficiaries, such as yourself or your spouse, and later your children or other beneficiaries.

One of the least understood features of revocable living trusts is how they can help insulate your assets from lawsuits. Many advisers labor under the false impression that it is only the irrevocable trust that gives lawsuit protection. However, revocable trusts are used more frequently.

One of the secrets to suit protection is often dependent on the existence of two revocable trusts, e.g., the husband’s trust and the wife’s trust. For example, if the husband is a physician who is vulnerable to lawsuits, perhaps he should consider transferring much or most of his estate into the wife’s living trust. By so doing, generally, the assets in the wife’s trust are not reachable by the husband’s creditors.

Family LLC

In more complex situations, where both the husband and wife are extremely vulnerable to lawsuits or litigation, or for a single person, we frequently place the family home in a family-limited partnership. This approach is not without some adverse side effects. For example, you may lose the Internal Revenue Code section 1034(a) advantages of having 24 months following the sale of your home to reinvest the proceeds and other tax-favored benefits.

This type of limited liability company provides creditor protection for named parties and offers tax savings on estate and inheritance. It may be created by an enterprise or individual. Membership is limited to blood-related or married family members.

Asset Protection and Adequate Insurance

The relationship between asset protection and insurance is rarely discussed and is generally poorly understood. Some asset protection planners advise their clients to get rid of their insurance coverage altogether. The rationale is that the existence of an insurance policy creates a target for plaintiffs’ attorneys. The money saved by eliminating insurance coverage can be utilized, of course, to pay the planner’s fees in setting up the expensive asset protection plan that will render insurance coverage unnecessary.

Of course, this advice is ridiculous and dangerous. The insured person has little or no financial stake in whether an insurance company pays a plaintiff’s claim other than the possibility of future premium increases. This advice also does not recognize that plaintiffs’ attorneys focus closely on reaching settlements with insurance companies and moving on to the next case, instead of wasting money and, more importantly, time that could be applied to getting their next big insurance settlement. Similarly, the business owner’s or professional person’s main motivation should be to get rid of a lawsuit and get back to making money, not to spend years dodging creditors. Insurance then is an incredibly useful and often relatively inexpensive asset protection tool.

It is specifically designed to transfer the risk of loss away from the insured person and to the insurance company. To the extent that it makes economic sense to cover a particular risk and insurance is available, insurance always should be the primary risk management method and asset protection should play only a secondary role.

It’s important to ensure you have adequate insurance. Too little of it poses a serious financial risk. At the very least, you will consider having ample funds to cover your net worth.

Other asset protection considerations include the avoidance of integrating assets, reviewing joint accounts, and formalizing business relationships. The gray areas are dangerous when it comes to business projects and partnerships. Make sure your interests are protected by creating an LLC or corporation. Remember, being a sole proprietor means that you are the sole entity that another party could sue.

There are other options as well that you can consider. For more information and assistance schedule your free consultation in our offices in Maryland or Virginia, in your house, or online. We are also available to meet on weekends and after working hours. You may schedule your consultation by calling us Toll-Free at 855-559-4557 or by emailing us at yasir@islamicwillstrust.com.

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Appointments are typically scheduled two weeks in advance.