What is Asset Protection?

Asset protection is the concept of and strategies for guarding one's wealth. Asset protection is a component of financial planning intended to protect one's assets from creditor claims. Individuals and business entities use asset protection techniques to limit creditors' access to certain valuable assets while operating within the bounds of debtor-creditor law.

Key Takeaways

  • Asset protection refers to strategies used to guard one's wealth from taxation, seizure, or other losses.
  • Asset protection helps insulate assets in a legal manner without engaging in the illegal practices of concealment (hiding of the assets), contempt, fraudulent transfer (as defined in the 1984 Uniform Fraudulent Transfer Act), tax evasion, or bankruptcy fraud.
  • Jointly-held property under the coverage of tenants by entirety can work as a form of asset protection.

Understanding Asset Protection

Asset protection helps insulate assets in a legal manner without engaging in the illegal practices of concealment (hiding of the assets), contempt, fraudulent transfer (as defined in the 1984 Uniform Fraudulent Transfer Act), tax evasion, or bankruptcy fraud. One common methods for asset protection includes a family limited partnerships (FLP).

If a debtor has few assets, bankruptcy may be considered the more favorable route compared to establishing a plan for asset protection. If significant assets are involved, however, proactive asset protection is typically advised. Certain assets, such as retirement plans, are exempt from creditors under United States federal bankruptcy and ERISA (Employee Retirement Income Security Act of 1974) laws.

In addition, many states allow exemptions for a specified amount a home equity in a primary residence (homestead) and other personal property such as clothing. Each state in the United States has laws to protect owners of corporations, limited partnerships (LPs), and limited liability companies (LLCs) from the entity's liabilities.

Asset Protection and Real Estate

Jointly-held property under the coverage of tenants by entirety can work as a form of asset protection. Married couples who hold mutual interest in property under tenants by entirety share a claim to a whole piece of property and not subdivisions of it. The combined ownership of the property means that creditors who have liens and other claims against one spouse cannot attach the property for their debt reclamation efforts. If a creditor has claims against both spouses, the tenants by entirety stipulations would not protect the asset from being pursued by that creditor.

Some attempts at asset protection include putting the property or financial resource in the name of a familiar member or other trusted associate. For example, an heir might be gifted ownership of real estate or other property while the actual owner continues to reside on the property or make use of it. This could complicate efforts to seize property as actual ownership must be determined. Financial accounts may also be domiciled inoffshore banks in order to legally avoid paying taxes against those funds.

What Is Tenants by Entirety (TBE)?

Tenants by entirety (TBE) is a method in some states by which married couples can hold the title to a property. In order for one spouse to modify his or her interest in the property in any way, the consent of both spouses is required by tenants by entirety. It also provides that when one spouse passes away the surviving spouse gains full ownership of the property.

Understanding Tenants by Entirety (TBE)

For example, a husband could not decide to sell his ownership interest in a vacation home owned with his wife without the wife's consent.

About half of the U.S. states allow tenancy by entirety for all types of property; a handful of states allow it only for real estate. Other possible structures under which spouses may choose to jointly own property include tenancy in common and joint tenancy. Each method of holding title affects each owner's rights to transfer the property and use it as collateral. The ownership structure also determines what will happen to the property when one spouse dies and whether the property can be used to satisfy a debt or judgment.

How Tenants by Entirety Are Viewed From a Legal Perspective

Property that is held by tenants by entirety is comparable to community property. Both spouses mutually own the entire property as a whole rather than any type of subdivision where each would have individual ownership. The rights of tenants by entirety can supersede the terms laid out in a will or trust that might otherwise grant property to heirs upon the death of one of the spouses.

For example, the will left by a deceased party might state they want one of their surviving children to take possession of a piece of property. If that property is jointly-owned by the decedent’s spouse and falls under the terms of tenants by entirety, the terms of the will may be ignored. The surviving spouse would retain sole ownership of the property.

The nature of tenants by entirety means that creditors who may have claims against one spouse’s assets cannot pursue the jointly-held property for compensation. If both spouses hold joint debt with creditors, they could pursue the jointly-held property. Federal tax liens against one spouse could in some circumstances be attached to property that is covered by tenants by entirety and potentially subject to seizure.

A tenancy by entirety can be eliminated under such circumstances as a divorce, which would see the property divided between the parties, or a voluntary, mutually-sought petition by both parties to change the nature of ownership.

What Is Tenancy in Common – TIC?

Tenancy in common is an arrangement where two or more people share ownership rights in a property or parcel of land. The property may be commercial or residential. When a tenant in common dies, the property passes to that tenant's estate. Each independent owner may control an equal or different percentage of the total property. Also, the tenancy in common partner has the right to leave their share of the property to any beneficiary as a portion of their estate. Contract terms for tenants in common are detailed in the deed, title, or other legally binding property ownership documents.

What Is Joint Tenancy?

Joint tenancy is a legal arrangement in which two or more people own a property together, each with equal rights and obligations. When one of the owners in a joint tenancy dies, that owner's interest in the property passes to the survivors without the property having to go through the courts.


At Nugent & Associates, we're not just number crunchers. We bring over 3 decades of invaluable certified public accounting and tax expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help with estate planning.

Even better, we will give you time to focus on what you do best: running the day-to-day operations that drive your business toward success.

Take advantage of our FREE and no obligation business checkup.

We will visit you at your business at a time and day convenient for you, analyze your numbers, discuss your goals and concerns and report back with a complimentary detailed written analysis to help your business succeed!

At Nugent & Associates, we're not just number crunchers. Our people bring decades of invaluable certified public accounting and financial and tax expertise to you – offering tax and financial strategies to individuals such as yourself. If you have any questions or concerns about your own tax, financial or investment matters, please do not hesitate to contact us.

Experienced tax and financial experts are not just for the super rich. At a reasonable fee you too can maximize your wealth and receive professional guidance for retirement, and/or any tax issues you may be facing, no matter your situation, with a tax and financial expert as your consultant.

Contact Nugent & Associates today. We don't charge for phone calls. You may just find you found an ally in your quest to have a great financial future.

After all, at Nugent & Associates, we succeed when you succeed!


Disclaimer:

PLEASE READ THE FULL TERMS AND CONDITIONS OF THIS WEBSITE BEFORE USING THIS WEBSITE.

This page is intended to be informational. This website, nor any of the information contained on this site constitutes professional, business, tax or legal advice and is not a substitute for such advice nor does it create a professional-client relationship between you and Nugent & Associates.

State and federal laws change frequently, and the information in this page may not reflect your own state’s laws or the most recent changes to the law.

The information contained within this website should not be considered as a solicitation or an offer for a professional-client relationship. Materials contained in this website are of a general nature and should not be substituted for professional advice. Nugent & Associates is providing this website and the information contained herein only as a convenience to you. Nugent & Associates assumes no liability or responsibility for any errors or omissions contained within this website. There is no guarantee that the information included on this site is current, accurate, complete, useful, or reliable.

Tax Planning & Preparation

We assist our clients in individual and business tax planning throughout the year.

Nugent & Associates provides:
  • Year-Round analysis to ensure a smooth and predictable year-end close.
  • Assist in establishing retirement planning.
  • Performs in-depth review of all deductions available.

Monthly/Quarterly
Financial Statements


Nugent & Associates offers outstanding accounting services and acts as a quasi-controller for companies who do not employ their own full-time accountants.

This allows our clients with more time to focus on new services, new customers and other core business issues.

Business Planning, Budgeting
& Growth Strategies


Nugent & Associates assists it clients with:
  • Starting a new venture, product or service
  • Expanding a current organization, product or service
  • Buying a new business, product or service
  • Turning around a declining business

QuickBooks Training
& Support Services


As Certified QuickBooks Professional Advisors, we can be of assistance with QuickBooks accounting or payroll and help increase your productivity and efficiency.