Asset Protection for Professionals and Business Owners in Texas
Serving Clients in Houston and the Surrounding Area
If you are a professional or business owner in Texas, you have spent years building your career, your business, and your personal wealth. Unfortunately, you are also a target. Lawsuits, creditor claims, and unexpected liabilities can threaten everything you have worked to build. Asset protection planning is the process of arranging your affairs – legally and ethically – to minimize the risk that a future creditor can reach your personal assets.
Asset protection is not about hiding assets or defrauding creditors. It is about using the legal tools available under Texas and federal law to structure your holdings in a way that makes them more difficult for a creditor to reach. The best time to implement asset protection strategies is before a claim arises. Once a lawsuit has been filed or a liability has been incurred, your options become much more limited, and transfers made after that point may be challenged as fraudulent.
Exempting Assets in Texas
Texas is one of the most debtor-friendly states in the country when it comes to asset exemptions. The Texas Property Code provides generous exemptions that protect certain types of property from the claims of most creditors. Understanding and maximizing these exemptions is a critical first step in any asset protection plan.
The most well-known Texas exemption is the homestead exemption, which protects your primary residence from forced sale by most creditors regardless of its value, provided it sits on no more than 10 acres in an urban area or 100 acres (200 for families) in a rural area. Texas also provides exemptions for certain personal property, including home furnishings, tools of a trade, and motor vehicles. Additionally, Texas exempts certain retirement accounts, life insurance policies, and annuities from creditor claims.
By understanding which of your assets are already exempt under Texas law, you can make informed decisions about where to hold your wealth and how to structure your financial affairs to maximize the protection the law already provides.
Limiting Liability for Professionals & Business Owners
For professionals and business owners, one of the most effective asset protection strategies is to operate through a properly structured business entity. A limited liability company (LLC), a corporation, or a limited partnership can provide a layer of protection between your personal assets and the liabilities generated by your business activities.
When a business is properly formed, funded, and maintained, the business’s debts and liabilities are generally limited to the assets of the business itself. Your personal assets – your home, your savings, your retirement accounts – are generally beyond the reach of business creditors. However, this protection is not automatic. If you fail to maintain the corporate formalities, commingle personal and business funds, or use the entity as a mere alter ego, a court may “pierce the corporate veil” and hold you personally liable for the business’s obligations.
For professionals such as doctors, lawyers, and accountants, the analysis is slightly different. Professional liability (malpractice) typically cannot be shielded by a business entity – you remain personally liable for your own professional acts. However, a properly structured entity can protect you from the malpractice liability of your partners and from the general business liabilities of the practice.
Transferring Risk with Insurance
Insurance is the most straightforward and widely used form of asset protection. By transferring risk to an insurance company, you ensure that a covered claim is paid by the insurer rather than from your personal assets. For business owners and professionals, the most important types of insurance include general liability insurance, professional liability (malpractice or errors and omissions) insurance, umbrella or excess liability insurance, and directors and officers (D&O) insurance.
Insurance is not a substitute for other asset protection strategies, but it is an essential complement to them. A well-designed insurance program covers the risks that are most likely to arise, while asset protection planning addresses the risks that insurance does not cover or that exceed policy limits. Together, insurance and asset protection planning provide a comprehensive shield for your personal and business wealth.
At The Stegall Law Firm, we work with professionals and business owners throughout Houston and the surrounding area to develop customized asset protection plans. We analyze your specific situation, identify your vulnerabilities, and implement the strategies that provide the most effective protection for your unique circumstances.