You spend your whole life building wealth and gaining financial stability so you can breathe easier as you near retirement. Without protecting your assets, you might be left holding your breath instead. Asset protection planning uses financial and legal strategies to safeguard your assets from creditors, lawsuits, seizure, and taxation. When you create a solid asset protection plan, you set up a barrier between you and anyone looking to access your assets. You can also provide for your family while controlling how your hard-earned assets are used and where they ultimately go.
What Is Asset Protection?
Asset protection is a type of estate planning. You use different tools and strategies to create a wall around your assets that keeps creditors and other claimants from linking you to those assets. This is an important component of estate planning because you choose what assets become part of your estate after you die.
Estate planning is the process of arranging for the management and transfer of your assets in the event you become incapacitated or when you pass away. Unfortunately, estate plans are not always bulletproof. Creditors, heirs, and beneficiaries of your estate can contest your will or trust, leaving the fate of your assets in the hands of a probate judge. Asset protection, on the other hand, safeguards your assets from the reach of claimants. You want your estate plan and asset protection strategy to complement each other.
Importance of Asset Protection
Without any asset protection planning, your property, money, and belongings may be vulnerable. For example, if someone sues you or your business, everything that you worked hard to build can be wiped away. If you end your marriage, your assets may not end up entirely in your hands. Protecting your wealth is also important because you want to have the assets available to use and generate income for your future.
Benefits of Asset Protection
The most talked-about advantage of asset protection is keeping your assets from a creditor’s reach. However, an asset protection plan can offer many more benefits when done properly.
Ensures You Have Assets Available to Use As You Age
Long-term care costs can be high. Whether you need to pay for an in-home aide or your spouse must live in a nursing home, you can anticipate and plan for those expenses. With strategic asset protection planning, you can avoid spending your entire life savings on health care and actually have something to pass on to your family.
Provide for Your Family
Losing a loved one is emotionally challenging and may also cause a financial burden. You can alleviate the stress for your family by setting aside assets for financial support.
Enjoy Tax Benefits
By properly structuring and funding certain types of trusts, you may be able to avoid or reduce state income taxes. You can also minimize estate taxes by removing assets from your estate through the use of a trust.
Who Should Do Asset Protection Planning?
Asset protection is for anyone with assets that are at risk. Risk can come from a business in bankruptcy or a spouse in a divorce. And we all run the risk that we might need extensive healthcare later in life. So properly protecting your assets is one way to ensure you’ll have the money you need when you need it.
Business owners often establish some type of asset protection because of their increased exposure to liability. Those with high-income professions, such as entertainers, doctors, and professional athletes, also work with their financial and legal advisors to protect their assets from those who may make frivolous claims. However, you do not need to own a company or be a millionaire to need asset protection. If you have assets that you want to keep, an asset protection plan is a must.
When you work with the Law Office of Andrew M. Lamkin, P.C., we will craft an asset protection plan based on your net worth, risk exposure, needs, and goals.
Asset Protection Strategies
There are many different ways to protect your assets. The right techniques and tools for you will depend on a number of things, such as the type and value of your assets, your debts, and your objectives. Here are some common asset protection strategies that can offer significant benefits.
A trust is a legal contract where a person (the grantor) appoints a trustee to manage assets for the benefit of another person or entity (the beneficiary). If structured correctly, trusts are one of the best tools you can put into your asset protection arsenal. They come in many varieties, serve different purposes, and can include just about any requirement or condition the grantor wants. For asset protection purposes, here are some commonly used trusts:
- Bypass or credit shelter trust;
- Irrevocable asset protection trust;
- Grantor trust;
- Medicaid trust
- Qualified Terminable Interest Property (QTIP) trust; and
- Irrevocable Life Insurance Trust (ILIT).
Trusts are complex, and they must meet certain legal requirements. It is important to have an experienced estate planning legal matters lawyer draft your trust document so that it includes the necessary clauses and language to achieve your desired purposes.
Using business entities as a way to protect your assets is a powerful strategy. Popular among business owners, a limited liability company (LLC) allows you to separate your personal assets and debts from your business. As the LLC owner, you are not personally liable for any claims against the LLC, meaning your personal assets are untouchable if someone sues the LLC.
Let Us Put Our Experience to Work for You
Asset protection requires strategic legal planning. If done properly, you can preserve your wealth for generations to come. At the Law Office of Andrew M. Lamkin, P.C., we can help you create an asset protection plan that meets your current needs and satisfies your future goals.
Principal and founding attorney Andrew M. Lamkin has 15 years of experience helping individuals create and protect their legacy. Let us put our experience to work for you. Call our office or go online to request a free consultation.