Spring, TX estate planning & probate lawyer Michael C. Riddle shares how he can help you to protect your assets. He states that the most important aspect of asset protection, according to him, is a thorough understanding of the laws governing each type of asset. Each asset—whether stocks, bonds, or real estate—has its own legal characteristics, and he emphasizes the need to structure them properly to ensure protection under Texas law.

Texas law is unique in that it provides a mechanism where a creditor or litigant cannot directly access certain assets; they are limited to a charging order against the entity, such as a limited partnership. Under this structure, while the creditor has the right to receive income from the partnership, the general partner retains discretion over distributions. As a result, the creditor may receive a K-1 reporting taxable income without actually receiving cash to pay the taxes, effectively “poisoning” the assets.

This strategy allows the assets to be distributed through gifting or estate planning to the intended beneficiaries while keeping control in the hands of the general partner, who can make informed and prudent decisions regarding the entity.