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Safeguarding Your Assets: 5 Strategies for Georgia Residents

You’ve probably put a lot of effort into accumulating your assets and increasing your fortune while providing for your family over the span of your lifetime. But have you given any thought to what may occur if a creditor or court ruling put your financial stability in jeopardy? Did you know that strategies for asset protection can be used in these situation? Asset protection is a well-known legal strategy that could assist you with securing your assets from possible creditors and judgments. In this blog, we'll go over the several Georgia asset protection options that are available to you.

1. Asset Protection Trusts

An asset protection trust is a legal arrangement where you transfer your assets to a trust that you control. As a result of the arrangement your assets are shielded by the trust from possible creditors and judgments. The adoption of the Uniform Trust Law by Georgia allows for the establishment of domestic asset protection trusts (DAPTs). The assets of a DAPT are safeguarded against prospective creditors while still allowing the grantor to maintain some control over the trust's assets. A DAPT is only valid under Georgia law if it is irrevocable (which means the trust cannot be modified after is creation and execution) and has specific mandatory clauses.

2. Limited Liability Companies

Another strategy for shielding your private assets from potential commercial liabilities is to form a limited liability company (LLC). Utilizing this method allows for your personal assets and your corporate assets to be legally separated by an LLC. This means that your personal assets will be safeguarded in the event that your company is sued or a creditor files a claim against it. According to Georgia law, LLCs are protected from charging orders. As a result, a creditor can only get a charging order against the LLC's distributions; the LLC cannot be made to sell its assets. It is essential to seek legal advice to make sure your LLC is correctly set up because this protection is not absolute and there are instances where a judge may permit a creditor to pursue the assets of the LLC.

3. Homestead Exemption

Homestead exemptions are available to Georgia homeowners, shielding their primary residence from prospective creditors. Depending on the county in which you live, the exemption amount might range from $10,000 to $21,500. The homestead exemption is automatic and does not require any action on your part. It is important to note, however, that the exemption does not shield your house from tax liens, mortgage arrears, or bills owed to contractors who have performed work on your property (mechanics/materialmans liens).

4. Retirement Accounts

In Georgia, retirement accounts like 401(k)s, IRAs, and Roth IRAs are protected from creditors. This means that even if you file for bankruptcy, creditors cannot withdraw funds from your retirement account to settle your debts if you owe them money. It is important to note that this protection is available both inside and outside of bankruptcy proceedings. Nonetheless, these protections have some limitations. The amount of protection for these accounts depend on a wide array of circumstances such as the type of retirement account, the amount of money in the account, and the particulars of your financial condition. These are a few examples of the potential limitations on the protection you may receive.

5. Family Limited Partnerships

A family limited partnership (FLP) is a type of legal entity that enables you to maintain control of your assets while transferring them to a partnership. A general partner, who could be yourself or a trusted relative, is then responsible for managing the partnership. Although they own a stake in the partnership, limited partners—typically your children or grandchildren—do not have access to its assets. It’s important to note that FLPs can be quite complex and require careful design and execution to be effective. However, if properly executed, FLPs can offer significant benefits for asset protection and estate planning!

In brief, asset protection serves as key component of any comprehensive financial plan or estate plan. To protect your assets from possible creditors and judgments, Georgia offers a number of legal options. But, it is important to remember that the effectiveness of the options depend on a number of variables, such as the particular assets you want to preserve, your financial circumstance, and your overall financial goals.

It is essential to work with a firm that can guide you through the legal framework and create a personalized asset protection strategy that is suitable for your particular needs.

If you or a loved one is interested in discussing any of the above legal strategies in detail, please don't hesitate to reach out to the Law Office of L.M. Otey.

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