We’ve seen it far too often. Business owners, particularly those who are chiropractors, dentists, physicians and other professionals in typically high-risk professions – follow an asset protection strategy that never truly goes as planned. What’s this strategy?
Many business owners transfer their assets to their spouse for asset protection purposes. Let’s consider the following scenario to see why this is a terrible idea.
Brian is a successful orthodontist. He has been married to Anne for eight years. Brian decides to move all of his assets into Anne’s name to protect their assets from potential lawsuits. For the next couple of years, everything is great. Then this past year, Brian sold a related business for a few million dollars and all the proceeds ended up in the wife’s name. The circumstance could have been fine if Brian and Anne had stayed married, but they did not.
For over one year, Anne tied up all the assets, so much that Brian couldn’t even pay his rent. Ultimately, he was awarded 60% of the assets, but the emotional and financial cost could have been avoided with proper planning upfront.
Another key consideration regarding this common, albeit flawed, asset protection strategy, is that transferring assets into a spouse’s name does not actually protect those assets. Although the assets may be protected from a malpractice or client lawsuit, the assets are not protected from other kinds of risks that a spouse may be engaged in as part of his or her life, such as personally getting sued after a car accident.
At Socius Law Firm, after we have a foundational plan in place for you, we’ll look at asset protection strategies that will truly protect what you own in the way that you want. Contact us today at 508-870-5759.