Many people mistakenly believe that asset protection only becomes important when facing imminent bankruptcy. This understanding is significantly off the mark. Attempting to hide assets when creditors are already identified can be deemed ‘fraudulent conveyance’ and ineffective.
On the contrary, asset protection is a lawful tactic to organize your assets in a way that can endure potential future attacks from creditors. It’s most effective when applied proactively, with thoughtful anticipation and planning. Here are five situations where asset protection would be appropriate:
Guarding Finances Against Irresponsible Grown-Up Kids
Certain families are faced with members who struggle with issues of substance abuse, gambling, and financial mismanagement, among others. Directly leaving money to these individuals could be risky as there’s a high chance they might not utilize it beneficially.
It might not be wise to leave money directly to A child grappling with alcohol addiction. A more prudent approach would be to have a responsible child oversee and manage the funds. Trusts can be crafted in a manner that regulates the money distribution to a wasteful family member. Consequently, the funds remain safeguarded from both the individual and any potential creditors they may have.
Create a Legacy for Your Family
Establishing a familial legacy can also be accomplished by segregating your possessions from your personal wealth. This can be carried out through mechanisms like a land trust or a trust fund, which serve as an independent entity that owns your assets and is overseen by a reliable fiduciary such as a lawyer. This measure protects against possible misuse or seizure of these assets by family members during personal conflicts, like at the time of death or divorce.
Seeking the assistance of a seasoned attorney like Blake Harris Law, who specializes in setting up dynasty trusts, can facilitate the transfer of wealth without it being diminished by federal and state inheritance taxes. Understand that an effective asset protection strategy in one state may not be suitable in another.
Save Money
Emphasizing asset protection can guarantee long-term monetary savings. It’s not just about preserving your assets for longevity; it also involves keeping your maintenance schedules in check to avoid extensive repairs. Substantial damage could cost a company thousands, which can be damaging.
Avoid Probate
Probate is the legal procedure of authenticating a deceased individual’s will, estimating their possessions’ worth, settling outstanding bills and taxes, and distributing the remaining assets to the heirs. The primary motivation for people to consult an estate planning lawyer is typically to circumvent this probate process.
Despite many not having direct experience with probate, they are determined to evade it, often due to frightening accounts about probate they’ve heard in the media or from acquaintances, friends, or business colleagues. For most people, dodging probate is an excellent incentive to establish an estate plan, and this objective can be effortlessly accomplished.
Safeguarding Finances Against Future Debts and Losses
Should you be involved in an enterprise with a potential risk of legal action, it’s advisable to safeguard as many of your assets as possible. Attempting to relocate your assets once a claimant has emerged could be considered deceitful and may not work in your favor.
There are numerous methods to protect your assets, including, but not limited to, LLCs, irrevocable trusts, family limited partnerships, corporations, and trusts in different jurisdictions. The essential aspect of asset protection is to initiate it before it becomes an urgent requirement.
Endnote
You’ve exerted considerable effort to build up your wealth and assets. It’s only fair that you secure them for a financially comfortable retirement and for the benefit of people or causes you hold dear after you’re gone. An attorney skilled in asset protection planning can help you craft a bespoke plan that suits your particular needs.
