Piercey & Associates, Ltd. Explains the Principles Behind Asset Protection as it Applies to Estate Planning

Asset protection is a highly important consideration when you are engaging in estate planning activities. Tax considerations may force your heirs to give up more of their inheritance than they should in the absence of proper estate planning and asset protection.

Piercey & Associates Ltd explains the principles behind asset protection as it applies to estate planning, giving practical tips on how you should structure your affairs to make sure that your heirs receive as much of your money and property as possible.

What is Asset Protection?

Asset protection is a crucial part of financial planning. It helps to prevent creditors from taking away your family’s assets both during life and after your death. Asset protection should be put into place as early as possible, without waiting for the elder years. Both individuals and businesses can use asset protection to keep creditors away from assets while complying with laws governing the interactions between debtor and creditor.

Assets include homes, bank accounts, vehicles, and other types of property. Generally, retirement income is exempt from creditors.

Creditors can include credit card companies, banks, people who are filing lawsuits, and ex-spouses. All of these categories of creditors need to be planned for when setting up asset protection strategies.

Asset protection involves not only structuring documents to keep funds out of the hands of fraudulent creditors but also helps to prevent cases from going to probate court. When probate courts get involved, money is often lost that should go directly to the surviving family members.

Techniques for Asset Protection

Common methods of asset protection involve setting up trusts, family limited partnerships, and LLCs. Asset protection helps families with larger financial assets but can be used by families with a lower net worth as well.

Asset Protection Trusts

Asset protection trusts hold an individual’s assets and shield them from creditors. When you put an asset protection trust in place, you can feel reassured that you have the best possible protection against lawsuits, creditors, or judgments against estates.

Asset protection trusts also have the power to protect your assets from creditors or claimants. The United States is a litigious country, and generally, anyone with a dishonest wish to profit from your estate can file a lawsuit. Having an asset protection trust is one of the best ways to prevent litigation.

Revocable trusts generally cannot provide protection of this type. In this case, creditors can actually invoke your revocation power, both only while the grantor is living. This type of trust includes living trusts.

When setting up an asset protection trust, it is crucial to appoint a trustee who is not an agent, controlled employee, close relative, or spouse.

Trusts must be associated with the correct jurisdiction in order to be effective. Offshore trusts are possible, but these trusts need to be set up carefully to comply with the laws of both countries. If you are found to put money inappropriately in an overseas trust, your family could face stiff legal penalties.

Family Limited Partnerships

A family limited partnership is another great option for asset protection. Family limited partnerships (FLP) are beneficial because they can cover estate planning, asset protection, and tax minimization. Like asset protection trusts, family limited partnerships can protect your property from creditors and high taxes.

Family limited partnerships have been codified as law. All fifty states have adopted the Revised Uniform Limited Partnership Act, which stipulates that assets owned in this type of partnership are not owned by individual partners.

This means that the assets can’t be accessed by individual creditors. Keeping money and property out of creditors’ hands and allowing your spouse and children to use it is the final goal.

FLPs are especially useful for individuals with a high net worth and significant properties. Physicians and other professionals benefit from these trusts because they can help to protect against malpractice lawsuits. People who own rental property are also advised to use this type of partnership because they can be protected against property liability litigation.

Other Options

If debtors do not have significant assets or asset protection strategies in place, it may be preferable to file bankruptcy. With bankruptcy, creditors cannot access motor vehicles, household goods, retirement accounts, and Social Security payments.

Protecting Your Livelihood

You have worked hard for your assets, and you should not have to fear that your assets will be taken away by courts and creditors before your family can receive the benefits your assets can provide. An attorney like Piercey & Associates Ltd. can help you perform this important task. Estate planning is a must for families with any level of assets.

When asset protection is done well, this means that bad actors cannot access your property and that your family’s livelihood will be protected. Talking with an attorney like Piercey & Associates Ltd can help you understand your options when it comes to estate planning. Having a solid estate plan will also help your spouse feel more secure and make sure that your family will be able to live the lifestyle they are accustomed to after you are gone.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes