Asset Protection for Professionals and Business Owners in Connecticut
Serving Clients in Stonington and the Surrounding Area
Asset protection planning involves making prudent decisions today to protect yourself, your business, and your hard-earned assets from loss due to lawsuits, creditors or bankruptcies. Asset protection planning is especially prudent for professionals and business owners, whose personal assets could be at risk due the nature of their employment.
Asset protection involves structuring ownership, control, access, and management of assets to preserve value in the face of potential creditor claims. Additional circumstances that heighten the need for asset protection include:
- Second or third marriages
- Children or grandchildren with special needs
- Disability or incapacity
- Substantial inherited wealth
For families passing wealth to the next generation, a properly drafted trust is one of the most reliable ways of protecting an inheritance from creditors.
In estate planning, how property is titled also matters, particularly when co-owning a vacation home with siblings or other family members.
Statistically and anecdotally, we all know that the number of divorces, lawsuits and bankruptcies is staggering. While no one believes lightning will strike them, wealth created through a lifetime of work, saving and investing can be lost overnight if these forms of man-made lightning do strike. To protect your assets from such disaster, proper risk management strategies should be given careful consideration. These strategies include exempting your assets from the claims of creditors, limiting your liability through legal entities, and transferring your risk through insurance.
Exempting Assets in Connecticut
State and federal laws exempt some of your assets from the claims of creditors. Important to note is that while some states allow you to choose either the state or federal exemptions, in others you must use the state exemptions … and federal bankruptcy exemptions are not available.
Once you have identified the protected asset classes available to you under applicable law, it may be prudent to maximize your protection by converting non-exempt assets into exempt assets.
Limiting Liability for Professionals & Business Owners
Many entrepreneurs operate their businesses as sole proprietors rather than through a legal entity, such as a Corporation or a Limited Liability Company. Whether their business is home-based or in the Fortune 500, these business owners are attracted by the informality of sole proprietorship. They also do not want to incur legal fees to create and maintain a legal entity. However, in addition to other advantages, conducting business through a legal entity may offer substantial risk management benefits.
While lawsuits brought against a sole proprietorship are really lawsuits against the owner’s personal assets, lawsuits against a properly created and maintained legal entity are really lawsuits against the entity’s assets. Nevertheless, the selection of an appropriate legal entity is critical for managing your risk.
Transferring Risk with Insurance
When was the last time you reviewed the details of your liability insurance program with your insurance professionals? Are your policies current? Are the coverage limits adequate and are the deductibles reasonable? Have you scrutinized the policies for loopholes? Remember: the fundamental philosophy of any insurance coverage is to pay a premium you can afford to transfer a risk you cannot afford. During your asset protection planning, take time to understand both the risks you have retained and the risks you have transferred.
Frequently Asked Questions about Asset Protection
No. Because you keep control of a revocable trust during your lifetime, its assets remain reachable by your creditors. Revocable trusts avoid probate — that is a different job from protecting assets.
Usually yes, and this is where most protection actually happens. Leaving an inheritance in trust rather than outright can keep it out of a child’s divorce settlement or away from their creditors, while still allowing them to benefit from it.
Once a claim exists or is foreseeable. Transfers made after that point can be unwound as fraudulent transfers, and may make the situation worse. Asset protection is planning done in calm conditions, not a response to a problem already underway.
No. Legitimate asset protection uses ordinary tools — how property is titled, how trusts are drafted, which entities hold what — and is fully disclosed. Anything built on concealment is neither lawful nor effective.
Protect what you've built
Asset protection works best before there is anything to protect against.
We structure ownership and trusts so that what you leave behind reaches the
people you intended.
Call 860-415-0075 or request a consultation .