Asset Protection Planning

Asset Protection Planning

Plan Ahead

  • Asset Protection Trusts
  • Limited Liability Companies
  • Charitable, Revocable & Life Insurance Trusts
  • Private Trust Companies
  • & More

Asset protection amounts to planning. Planning after an event, or leaving events to chance, is exceedingly unlikely to yield the best outcome. The most effective strategies are often the simplest, e.g. insurance. However, insurance cannot cover everything. When life happens you will want to make sure you have taken the fullest preparations possible.

The strategies herein may be used to protect against your creditors, both present and future. They may also be used to ensure assets are passed responsibly to the next generation while remaining beyond the reach of your heir's creditors.

Protecting Asserts

Generally, protecting assets entails the layering of entities. Placing barriers between you and your assets does the same for your creditors. Increasing the difficult of accessing your assets makes you less of a target for a creditor. The inverse is holding everything in your personal name. This makes you vulnerable and creditors will find it easier to secure judgements and seize assets.

Asset Protection Trusts

Trusts are a time tested method for preserving wealth. Assets held in trust are intended for a beneficiary. The beneficiary does not own the assets outright, however. From this separation stems asset protection along with other benefits. Trusts are a creation of English law and became popular offshore vehicles. Over time, a number of U.S. states wrote trust law meant to compete with offshore jurisdictions. This is how the Domestic Asset Protection Trust came into being. Learn also about private trust companies. A number of states now allow for self-settled trusts.

Limited Liability Companies

Wyoming was the first state to allow Limited Liability Companies in 1977 and now every state allows them. Today, Wyoming continues to lead the nation with no state taxes on income, private ownership and charging order protection.

Captive Insurance

Captive insurance companies developed a bad name early on due to practicioners engaging in too aggressive of practices. Properly used, such vehicles are stellar vehicles for tax and risk management. They offer unparallelled flexibility.

The Next Generation

Inheritance is property gifted from a decedent, usually via a will or trust. A will must be validated through the probate process in all 50 states. On average, probate extends for three to six months, but can take up to two years or more if contested. In many cases, inheritance cash is used up during the probate process. All outstanding debts must be paid, along with legal fees and estate settlement costs before distribution of inheritance property occurs. When probate drags on for an extended period estate assets may need to be sold to pay estate related expenses; leaving nothing for beneficiaries.

A variety of options exist for protecting inheritance and estate assets. It is best to engage in estate planning probate to determine which strategy offers the best protection. The type of asset protection strategy will depend on estate value and type of inheritance property.

One strategy involves gifting money or property prior to death. Individuals diagnosed with terminal illness often use this strategy to ensure beneficiaries receive intended gifts. The IRS allows gifting up to $12,000 per individual or $20,000 per married couple, per year.

The benefits of inheritance gifting include: knowing the property will be given to the intended beneficiary; keeping estate assets out of probate; and reducing inheritance taxes.

The second inheritance protection strategy involves establishing a trust. Several types of trusts exist, so it is best to consult with a professional estate planner or probate lawyer. The primary benefit of trusts is inheritance property is exempt from undergoing the probate process.

The first step of setting up a trust involves executing a last will and testament and appointing a Trustee. Estate management duties for trusts are generally less involved than administering probated estates. Trustees are responsible for filing legal documents and distribution of inheritance property.

Estate planning is vital for protecting inheritance property. Most estate planners and probate attorneys offer complimentary consultations to help individuals determine which asset protection strategies are best suited for their needs.

Related Reading

Estate Planning Process

Learn what estate planning is about, from asset protection to planning your legacy.

Asset Protection Trust

Place your assets into a trust and outside the reach of creditors.

Private Trust Companies

Increase privacy and reduce cost by forming your own trust company.

Asset Protection Strategies

Learn various strategies for protecting your assets.