We’ve all had someone tell us at some point, “Don’t take it personally.” Well, if there’s one thing you should take very personally, it’s personal asset protection. People are familiar with estate planning’s protection of assets after they die, but they might not be familiar with what estate planning can do for them while they are alive. 

Especially in these uncertain times, it’s important to know about personal asset protection and do all you can to maximize your legal options and safeguards. Here is a brief overview of what we mean when we say, “personal asset protection.”

The Basic Definition 

Let’s start with the basic definition of personal asset protection, including what does and does not qualify. Asset protection involves strategies and legal tools to guard your wealth from creditors, lawsuits, and similar agents looking to cash in. Asset protection is used by businesses and individuals to limit what their creditors can and can’t take to satisfy a debt. You don’t have to be a millionaire to engage in asset protection—it’s something that is just as suitable for the working class as it is for the 1%.

What Asset Protection is Not

There is no denying that asset protection has gotten somewhat of a bad reputation. Over the years, there have been highly-publicized cases of illegal offshore accounts and shady white-collar dealings. However, those cases are not examples of asset protection: they are crimes. 

Asset protection operates within the bounds of the laws governing creditors and debtors. Concealment, fraudulent transfer, bankruptcy fraud, and contempt are all crimes—they are not legitimate ways to protect your assets, and you should never engage in them. 

Assets to Protect

It is advised that you protect your assets before a claim/liability happens. After a claim or liability happens, it is often too late to protect your assets. Therefore, you must be prepared. Retirement accounts, homesteads, annuities, life insurance, and trusts are all assets that you may be able to protect from creditors in the event of a suit. 

There are many methods of personal asset protection, but three of the most common include: asset protection trusts, family limited partnerships, and accounts-receivable financing. 

Common Methods 

An asset protection trust is subject to complex regulations and requirements. This trust is self-settled. The grantor (you) becomes the beneficiary and can access the trust account funds (your money). If structured correctly, the asset protection trust will not be reachable by creditors. It also offers certain tax savings, depending on your state. 

Secondly, accounts receivable financing involves capital that is principle to a business’s “accounts receivable.” Accounts receivable refers to certain business assets, such as outstanding balances of customer invoices that are due but have not been paid yet. Accounts receivable financing is more suited for a business than an individual, though small businesses owners can certainly take advantage of this flexible funding. 

Thirdly, a family limited partnership is another asset protection tool that is geared towards small businesses. An FLP lets a family pool its money together to run a company. Each member of the family purchases shares of the company, and they profit proportionately to those shares. This has been called a “powerful estate planning tool” for business owners. 

Protecting Your Home 

Though your home is not your only asset, it is perhaps your most valuable. The first way to protect your home from creditors is to take advantage of what is known as a “homestead” exemption. This exemption protects the value of your home from creditors. Forty-eight states have this homeowner protection, though they differ in terms of requirements and amounts. Also, twenty-one of those states require a homeowner to file paperwork to qualify for this exemption (i.e. it’s not automatic). 

Implementation of an equity stripping plan, creation of a domestic asset protection trust, moving the title of your house to the low-risk spouse’s name, and buying umbrella insurance are other options to protecting your home from creditors.  

If this is confusing to you, don’t be alarmed. You can contact an estate planning attorney to talk about your options. Though lawsuits seem like they won’t happen to you, they are remarkably common. America is a litigious society. There are forty million lawsuits filed every year in America. As the time-worn saying goes, it’s better to be safe than sorry. 

Visit our website to learn more about asset protection. 

If there’s one thing that has been true about 2020, it’s that things are changing rapidly. Whether it’s breaking news updates every day about the Coronavirus pandemic or tragic news about our favorite actors dying (#WakandaForever), this has been a tough year for us all. 

So how do we cope? When it comes to constant change and a stressful environment, you can only affect what is under your control. In this article, we’ll talk about ways to cope with life changes by using the legal system to your advantage. 

Living Will

If you don’t recognize the term “living will,” you might recognize this document as an “advance directive.” There’s no denying that the Coronavirus pandemic is here, perhaps to stay. And there’s also no denying that it is causing people to become sick (from mild symptoms to ventilation required), sometimes fatally. The numbers increase every day. 

What doesn’t change is that you need to be prepared if you fall ill. A living will is a legally-enforceable, written document that lays out your wishes in the event that you are hospitalized and unable to communicate. These wishes include medical treatments that you do or don’t want, whether you want to be kept alive under any circumstances, and organ donation and pain management preferences. 

These are all highly personal and contingent on your values and lifestyle. That’s why it is important to have your requests written; that way, they will be honored.

Power of Attorney

Along the same lines of a living will is a power of attorney. A power of attorney is a trusted individual who you appoint to manage your financial and/or medical affairs in the event that you are unable to do so yourself (incapacitation, illness, cognitive decline, etc.).  By appointing a trustworthy power of attorney, you know that you are in good hands. And, if the power of attorney performs poorly, there are legal safeguards in place to remove him or her from the position. 

Asset Protection 

Estate planning works on both sides of the veil, so to speak. It allows you to control how your assets are distributed after you die, as well as how to protect them while you are alive. By setting up trusts (whether inter vivos or testamentary), you can ensure that your assets are safeguarded against potential lawsuits or challenges. 

You can protect your assets so that your heirs get the most out of your estate after you die. In addition to those benefits, an estate planning attorney can also help you minimize tax obligations on your estate post-mortem. 

Small Business Planning 

Americans are very entrepreneurial, and a pandemic has not changed that cultural fact. Several businesses that were started during or immediately after economic collapse, recession, or serious global catastrophes include: General Motors, Hewlett-Packard, Burger King, Microsoft, Uber, Airbnb, and many more.

If you already have a business, then you know how precarious the times are. Having a business succession plan in the event of your death will protect what you have worked so hard for. If you’re just starting a new business, you should take protective steps as well. This includes purchasing top-notch insurance.   

Taking Care of the Kids 

Kids are resilient, but there is no denying that they, too, have gone through major changes in the past year. Kids are unable to go back to school, and they often see their in-person social lives shrink (if not disappear entirely). Though there is not much you can do about that, there are legal ways to take care of your kids’ future. 

Guardianship

If your kids are under the age of eighteen and something happens to you, who will get them? Estate planning allows you to set up guardianship papers, putting your kids’ lives into the hands of trusted adults. Contact your proposed guardian before you appoint them into the position. Setting up guardianship is a “just in case” safeguard that, while unpleasant to think about, is still a must-do.

529 Plans 

Pandemic or not, colleges will still exist in the future, and they will still likely be expensive. The IRS allows you to set up a 529 tax plan, which is a tax-advantaged program that allows you to save up for your kid’s college education. Each state is different, and every state has its own requirements, rules, and regulations for setting up such a plan. Contact an attorney to discuss your options.

Dealing with change can be scary and intimidating, particularly if you are not used to it. Fortunately, there are ways to manage the way we deal with these “winds of change.” Talk to an estate planning attorney to see how these legal safeguards can give you peace of mind. 

Labor Day has been around since the late 1800s after it was deemed a federal holiday in 1894. Labor Day has pretty much always been observed the first week in September. The holiday celebrates the achievements of the American labor force, and citizens get a day off to reflect on how hard they have worked. 

You’ve worked diligently to get where you are, and you need to ensure that you are protecting your assets and accomplishments. The legal system provides documents and tools to serve as asset safeguards. In this article, in honor of Labor Day, we’ll discuss the protections that estate planning offers your hard work. 

Estate Planning 101

While estate planning is a way to prepare for the distribution of your assets after you die, that’s not all this legal field is about. There is another side to estate planning that is just as important: the protection and preservation of assets. This includes minimizing tax obligations on your assets so that your heirs get the most out of your estate after you’re gone. 

Estate planning helps you protect your assets by providing a framework in the event that you’re incapacitated. Though estate planning is vital after death, it also is important during life. 

Asset Protection 

An estate planning attorney can help you minimize your tax obligations (legally) by navigating the tricky tax code. There are loopholes and maneuvers that a savvy attorney will recognize, but it takes a lot of experience to minimize taxes to the full. 

Asset protection also comes in the form of protection against lawsuits. This does not mean protection against getting sued (lawsuits are common in a litigious society like America’s), but estate planning can help take your assets out of the reach of a lawsuit. There are legal vehicles (trusts, for example) that take the assets out of your name and protect them. Once that money or property is beyond reach, there is also a chance that someone’s motivation to sue you might drop.

Wills

Let’s start with one of the most common documents associated with estate planning: a will. A will is a legally enforceable document. This document spells out how you want your assets—whether personal or financial—distributed when you die. The will sets the parameters of and parties to which the property will transferred. This is the easiest and cheapest way to start an estate plan. 

However, a will is, by no means, the be-all, end-all of estate planning. Even with a valid will, you still have to go through the drudgery and expense of probate court. A trust is one way to avoid probate court. 

Trusts

Trusts are three-party fiduciary relationships that involve you (the donor), the person to whom you want to transfer property (the beneficiary), and a third party who holds the property/asset until you want the beneficiary to have it (known as the trustee). There are many, many different types of trusts, but two of the big ones to know are: inter vivos and testamentary. 

Inter Vivos Trust

As you may have guessed (if you have a rudimentary knowledge of Latin), this trust is created while you are still living. You transfer your assets into the trust, and this protects your money while you’re alive. If you choose to make your inter vivos trust revocable, it can be changed, amended, or even cancelled. But, if protecting your assets is the #1 priority, you consider making the trust irrevocable. An estate planning attorney will help determine which is best. 

Testamentary Trust 

Conversely, a testamentary trust is created when you die. In a trust document, you express your wishes as to how you want your property distributed upon your death. When you die, those wishes are honored. A trust is not only a great way to protect assets from legal challenges, it also can help you avoid probate court. 

This brief overview has hopefully helped you realize that estate planning and asset protection offer a lot of protections to conscientious workers looking to safeguard what they have worked their whole life to have.

Visit our website and learn more about estate planning.