Considering what will happen when you’re no longer around can be difficult. But planning for the future is important to ensure your family and loved ones receive everything they deserve.
Effective asset protection requires legal strategies that shield your property from claims and lawsuits. Here’s how an estate planning attorney can help:
Asset Protection Trusts
An estate planning attorney in California, also known as a probate attorney or trust and estate lawyer, specializes in legal matters related to the distribution of your assets after your death.
Asset protection can take several forms depending on the type of assets you own. Generally, you can protect your assets from creditors through an irrevocable trust, although more sophisticated techniques can also be used. However, these techniques add complexity and can be expensive to implement and maintain.
An asset protection trust transfers asset ownership to a trustee for beneficiary management. The trustee can then hold and invest these assets without risk from creditor lawsuits, nursing home spend-down, and scam artists. Generally, these trusts are a good option for individuals with significant net worth who want to shield their assets from potential creditors.
Domestic asset protection trusts have become increasingly popular to defend against creditor claims. However, they are still a relatively new planning tool with some limitations. They must be set up before the onset of legal threats and are subject to U.S. law, including state laws, bankruptcy laws, and federal tax rules.
One way to safeguard your assets from creditors is by transferring them to a retirement account, like an individual retirement account (IRA) or an employer-sponsored retirement plan governed by ERISA. This is a relatively simple strategy, and federal law protects the assets within these accounts from creditor claims.
Business Asset Protection
Business owners often use personal assets to launch and grow their enterprises. These investments can include computers, property, and reputation. They also may be exposed to lawsuits or claims. Without a solid asset protection strategy, those assets can be at risk.
Litigation is expensive. Even if you win the case, legal expenses drain your resources. Moreover, a judgment can impact your future earnings. The good news is that you can reduce your exposure with proactive measures to protect your personal and business assets.
Formalizing your business as a corporation or a limited partnership offers liability protection. It is important to separate your business and personal finances by keeping your assets in different bank accounts and not mixing them. You can also get business insurance to protect your company’s assets, including intangible assets such as a good reputation and customer trust.
An estate planning attorney can assist you in establishing a suitable legal structure and implementing the necessary strategies to protect your personal and business assets from creditor claims and legal disputes. These strategies must avoid illegal transfers, tax evasion, and fraud. It is advisable to implement these strategies before the need arises.
Asset Protection from Creditors
The country has seen an explosion of lawsuits, and there is a growing risk that personal and business assets could be lost to judgments by creditors or former spouses. Various strategies exist to shield property from these claims, which can be effective, depending on the situation.
One method involves transferring ownership to an irrevocable trust. It allows you to build a wall of protection around your assets because once the property enters this trust, you no longer own it; the faith does. It means that the assets are beyond their reach if someone sues you. However, this strategy only works if you have enough money to fund the trust adequately.
Another way to protect assets is to take advantage of your state’s laws regarding homesteads and annuities. Many retirement accounts, including IRAs and employer-sponsored qualified retirement plans — also carry some protection. Inheriting an IRA can diminish this protection; IRAs are generally only protected from creditors by federal law if owned by the deceased owner.
An entity like a limited liability company or family limited partnership (FLP) can also protect property by keeping it at arm’s length from your assets. Creditors may be able to “pierce the corporate veil” and seize personal assets, but this is usually only a concern in extreme cases.
Estate Planning
If you have a comprehensive estate plan, you could avoid losing your assets to creditors or future litigation. An asset protection attorney can review your situation to identify legal strategies that can help you protect your assets. After all, it took you a lifetime to accumulate your current assets. Why should this hard-earned wealth enrich a third party rather than your loved ones?
An estate planning attorney can assist in creating legal structures that allow for the transfer of assets to loved ones while minimizing taxes and fees. Depending on the complexity of your situation, these tools can include trusts, offshore accounts, and more. Your lawyer will discuss your options and work with your financial planner to ensure your estate plan addresses your needs.
Conclusion
It’s also a good idea to have your lawyer assist you in organizing all of your financial documents, titles, and insurance policies. It will make it much easier for your family to find what they need at the time of your incapacity or death. It’s also good to update your estate plan regularly as your life changes.
If you’re concerned about protecting your assets from potential lawsuits and creditors, consulting an experienced asset protection attorney is worthwhile. They can help you create a strategy to safeguard your hard-earned wealth, minimize taxes, and make it easier to pass on your assets to your loved ones.
