01 Jan What’s an Outside Creditor
By: Barry E. Haimo, Esq.
June 9, 2016
What’s an Outside Creditor?
We’ve talked in previous posts about who creditors are and how they can go after your assets. In “What’s an Inside Creditor?”, we discussed the basics of protecting your personal assets from creditors going after your business.
One of the most common ways to protect your assets from inside creditors is by forming a business entity, such as a corporation or limited liability company (LLC). But while forming an LLC or corporation can shield creditors of the business, or inside creditors, from your personal assets, your personal assets still remain vulnerable to other creditors that are unrelated to your business, or outside creditors.
If you do not create a strategic estate plan, debts created from personal dealings outside of your business can be taken by outside creditors. Any time you sign a contract or take out a loan under your name, rather than your business, you may have to answer to an outside creditor later.
When Do I Owe Money to Outside Creditors?
Inside creditors are after assets related to your business. Outside creditors, or personal creditors, are after your personal assets as the owner of a business, a homeowner, vehicle owner, brokerage account owner, etc.
There are many situations in which creditors may come after your assets. The following will leave you vulnerable to outside creditors:
- Personal loans, including those for buying a house, leasing an apartment for residential purposes, and higher education, are debts owed to outside creditors.
- Credit card debts can expose you to outside creditors.
- Failing to pay your utilities, cable and Internet, or phone bills will bring outside creditors to your door.
- If you are involved in an auto accident and are found to be at-fault, the injured person is an outside creditor. Insurance may not cover all of the damages owed.
- If a tort is filed against you, and you personally are found to be at fault for the negligence or damage within the tort, you will be pursued by outside creditors.
- Spouses seeking child support payments are outside creditors.
Many different situations can arise and bring outside creditors into your financial situation. It almost seems impossible to avoid outside creditors. So when outside creditors do begin to come for your assets, how do you keep them safe?
How to Protect Yourself From Outside Creditors
You will need to protect your assets in order to share them with loved ones and future generations. Different strategies and plans can be put in place for strong protection and financial security. Your estate planning attorney may recommend the following strategies for you:
- Taking advantage of Florida’s homestead laws
- Purchasing insurance to mitigate risk
- Retitling assets
- Funding qualified retirement plans
- Forming and funding Family Limited Partnerships
- Forming and funding Revocable/Irrevocable Trusts
- Forming and funding Charitable Trusts
- Engaging in Digital Asset Protection
Different strategies will be more effective for different business owners, families, and individuals. An experienced estate planning attorney can point you in the right direction and map out a purposeful strategy for protecting your assets.
Failing to take action in protecting your assets will leave you vulnerable to creditors. Leaving assets on the table is a bad idea. Creditors may be able to acquire the assets you planned to set aside for your future and the future of your loved ones. Contact an estate planning attorney today to discuss your asset protection needs and to set you up for lifelong financial security – and beyond.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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Originally posted 2016-06-09 11:20:54.