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Asset protection is also known as 'debtor-creditor law' and this basically describes the protection of people's assets. When you make money investing in assets this can mean tying your money up in properties or by taking out savings account, this means that your money will grow over time and that it will maintain its value and hopefully gain in value. Your assets are what keep you safe, which is why it's somewhat distressing when you find creditors closing in to try and reclaim them. Asset protection allows you to protect these assets and to choose them wisely so that you never risk having them taken from you. Here we will look more at what assets are, what liabilities are, and how to go about protecting those assets.

Making Money From Asset Protection

When you make money investing you are almost invariably investing in assets. Assets are economic resources that can be converted into profit. In Monopoly for instance your assets would be the utilities (water, electrcity), the stations, the properties, and the houses and hotels.

Liabilities however are the opposite. This is the money going out – legal financial obligations – and these are what the assets need protection from. To make money investing in assets successfully, you need to make sure that your assets are safe from your liabilities.

Liabilities can include:

  • Loans you have yet to pay back including mortgages etc.
  • Duties you need to fill out – for instance a fine or a settlement, or even a job you need to fulfill that you have yet to perform but have already been paid for.
  • Tax that you have yet to pay
  • Upcoming costs that can't be avoided
  • 'Equitable obligations' which are obligations that are not contractual and are based on ethics and verbal agreements. An equitable obligation might be a family member that lives with you...

Interestingly your assets and liabilities are actually co-dependent, and you can work out your assets as 'liabilities + owners equity'. Those who make money investing will know this well, but we won't worry about it for now.

Then if you are unable to pay these liabilities out of your capital, you may be forced to sell your assets in order to make payments. This can happen for instance if you are forced to take out a mortgage, if lenders come to repossess your belongings, or if you took out a loan that was secured against your property. Even pension funds are assets and these too can fall prey to your liabilities if you go into negative equity and if you weren't smart with your investments.

Investing In Asset Protection

Asset protection then involves securing your assets in such a way as to prevent them from being used to pay off your liabilities. For instance Swiss Annuities are a form of asset protection because the money is in another country, and because you've already paid the money in and won't have the option to get it all instantly back. Thus even if you go into bankruptcy and are forced to sell your assets, you will still have a monthly sum coming in from your annuity. Another form of asset protection is LLCs, home equity and some pension schemes. You can make money investing in LLCs or the correct pension schemes and this will be protected from your liabilities. Investing in collectible comics, medals, oil cans and other such items might also form kinds of asset protection as creditors may not know the value of those items (though this is a little underhand).

When you start trying to make money investing it is a smart idea to use asset protection in order to ensure that you have a 'worst case scenario contingency plan'. However you need to be aware of the laws surrounding asset protection and avoid using retirement schemes or annuities when you are already in trouble as this can be seen as an attempt to avoid your financial obligations and to derail creditors.

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