Brief About Asset Protection Effects

Many professionals of substantial means are often aware of how liability for their professional actions can affect their personal lives. For instance, doctors who find themselves subject to malpractice suits not covered by, or in excess of, their malpractice insurance coverage can often benefit significantly from an asset protection strategy. You may head to http://www.lawbh.com/santa-barbara-asset-protection-attorney/, if you want to have more info on asset protection.

Further, though asset protection has often been associated with insulating professionals from liability associated with the their professional actions, the recent plummet in real estate values has made highly-leverage real estate investors acutely aware of the importance of the insulation an asset protection plan can provide and is now a common form of estate planning throughout the U.S.

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Effects Of Asset Protection

Often the primary effect of asset protection is to place hurdles in the path of possible litigation in order to discourage such litigation. Moreover, by making assets unavailable to satisfy judgment claims, frivolous claims will often not be initiated and settlement of legitimate claims will often be necessitated.

In some cases, an asset protection plan can actually saddle a person's creditors with a substantial tax liability and no means by which to pay the liability. For example, a judge issues an order in favour of the creditor of a partner in a limited partnership. The order entitles the creditor to receive payments from the partnership that are due to the partner.

If the limited partnership is structured so that the managing partner has discretion as to if and when distributions are made and refuses to make a distribution to the partner, the IRS will often hold the creditor liable for the amount of the distribution that should have been made but was not.

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