Asset preservation is a method of using certain legal strategies to protect all of your assets so that they can be used by yourself, your family, and your spouse.

There are several different asset preservation strategies that an individual or business can use. These methods extend from establishing a limited partnership to obtaining a prenuptial agreement. While anyone can make use of asset preservation, these strategies are typically employed by high net worth individuals as well as a range of different types of businesses.

Protecting and preserving your assets can provide you with long-term stability and peace of mind. However, it’s important that you use the asset preservation strategies that best apply to your specific situation. When you implement these strategies correctly, you should be able to protect yourself against the possibility of serious financial setbacks. The following article goes into detail about the top three asset preservation strategies that you or your business can use to protect the money you have.

#1 Establish Limited Partnerships and Limited Liability Companies

One strategy for asset preservation involves establishing limited partnerships and limited liability companies when possible. A limited partnership is any kind of partnership that’s made with at least two partners. A key difference between general partners and limited partners is that the general partner will have an unlimited amount of liability pertaining to the debt in the business. On the other hand, limited partners will have limited liability in accordance with the amount that they’ve invested in the company.

There are many notable positives of creating a limited partnership, the primary of which is that it will allow you to limit the personal liability for business debts as mentioned previously. You cannot be held responsible for any company debts aside from the money that you’ve invested. This will protect you from incurring too many losses in the event that the business fails. If you’ve been searching for ways to build a company but are wary of the risks that come with investing your money, a limited partnership is a great way to lessen the amount of money that you could lose. Since your investment is protected, you don’t have nearly as much to lose as the general partner. However, this also means that you will have little control over the business operations.

A limited liability company is very similar to that of a limited partnership with the primary difference being that none of the owners of the LLC are responsible for the debts and liabilities associated with the company. If you create an LLC and eventually file for bankruptcy, the members of your company won’t have to use personal funds to pay off company debts, which is a great way to preserve your assets while still creating a business.

How to Start an LLC

If you believe that that the best method for creating a company is to start an LLC, doing so is relatively straightforward as long as you know what steps to take. In the majority of states, starting an LLC begins with filing Articles of Organization with the Secretary of State in whichever state you live in. The basic types of information that will need to be provided when filling out the Articles of Organization include:

• The full name of the company that you’re looking to create
  
• A detailed description of your company
  
• Your company’s mailing address, which can be a post office box if necessary
  
• The address and name of the registered agent, which is the individual or company that you’ve assigned to receive any legal papers on your behalf
  
• Basic information about the company’s managers and owners
  

When you file the Articles of Organization, you will also be tasked with paying a filing fee, which can vary by state. Expect to pay anywhere from $100-$250 in most states. Among the most notable aspects of this process is that you don’t necessarily need to obtain assistance from a lawyer to start an LLC, which should allow you to complete the process in a short period of time. The majority of states will allow you to file these documents by mail or online, which is another way that the process is streamlined. However, a few states have a requirement where businesses need to publish their intent to create an LLC in a local newspaper.

When you’re creating a limited liability company, it’s also highly recommended that you look into an LLC Operating Agreement. This type of agreement provides you with the ability to structure how your business will operate, which extends to everything from how each member will divide the profits to how the company will handle the arrival of new members. With this agreement in hand, your business can operate by the rules that you set as opposed to the rules put forth by the state.

#2 Create Asset Protection Trusts

Another strategy for asset preservation is creating asset protection trusts. An asset protection trust is a financial protection tool that you can use against judgments, creditors, and lawsuits. The assets that you place in this trust are shielded from creditors, which gives you the ability to avoid litigation and settle the debts on terms that are favorable to you.

When you’re creating an estate plan, asset protection trusts are among the top ways to protect the assets you currently have. This is considered to be a self-settled spendthrift trust, which means that you are the beneficiary and the settlor with a significant amount of control over how your assets are used. Many types of assets can be placed into an asset protection trust, which includes investment accounts, bonds, stocks, personal property, automobiles, and real estate. If you’re looking into establishing an asset protection trust, it’s important to understand that there are two basic types of trusts available to you, which include a domestic irrevocable trust and a foreign offshore trust.

Domestic Irrevocable Trust Vs. a Foreign Offshore

While a foreign offshore trust is considered to be the top option for asset preservation, a domestic irrevocable trust can also be highly beneficial. When selecting the type of trust that you should use with your assets, you’re basically choosing the legal jurisdiction that the assets are protected by. With a domestic irrevocable trust, the account will fall under U.S. legal jurisdiction. On the other hand, an offshore trust is subject to the laws of the country that the trust is placed in.

When you place your money into a domestic irrevocable trust, your assets will continue to be under court order, which means that certain U.S. state laws and federal bankruptcy laws could still apply to this trust. However, this trust is less expensive than its offshore counterpart. There are also many U.S. states that have created asset protection trust laws, which are flexible.

If you want to create an offshore trust, this type of trust is the kind of legal vehicle that isn’t subject to standard U.S. laws, which means that it will be very difficult for anyone to get to your assets. In order for someone to pursue the assets that you hold within an offshore trust, they will be required to use the foreign jurisdiction system with foreign legal counsel, which makes for a very time-consuming legal hurdle.

#3 Prenuptial Agreements

A prenuptial agreement is a kind of written contract that a couple can make before they get married. This contract will usually list every piece of property that each individual owns as well as any kind of debts that they’ve accrued over the years. The contract will be used to specify what the property rights are for each individual in the event that the marriage ends in the future. While a prenuptial agreement typically applies to divorce, it can also be used in the event of a death or separation.

Without a prenuptial agreement, all property and assets between the divorcing couple will be subject to the state divorce laws, which are typically centered around equitable distribution. This means that all property and assets would essentially need to be split regardless of who purchased the property to begin with. A prenuptial agreement allows separate pieces of property to remain separate.

Reasons to Create a Prenuptial Agreement

There are many reasons why a couple may want to create a prenuptial agreement, the primary of which is that they want to avoid a lengthy divorce process by specifying at the beginning how the property will be divided in the event of a divorce. When a prenuptial agreement has been signed, you won’t need to go through countless arguments pertaining to how property and assets are going to be divided, which can make the divorce process more straightforward. Some of the additional reasons to create a prenuptial agreement include:

• Passing separate property to children from previous marriages
  
• Getting protection from debts that were incurred by one spouse
  
• Clarifying any financial rights that each spouse has
  

If you want to protect the assets that you expect to make over the course of your marriage, creating and signing a prenuptial agreement is a great way to do so. Keep in mind that courts will look very thoroughly at the agreement, which means that it must be written in a legally sound manner.