Many people who hear the words “asset protection” may have images of the super-wealthy shuttling money offshore to escape the prying eyes of the IRS. While that is certainly one example of how some might try to shield their assets from lawful creditors, there is another type of asset protection that is far less controversial – and far more necessary. This type of asset protection is a part of every truly effective estate planning strategy, and can help to protect your estate from the threat of lawsuits, bankruptcies, and unforeseen creditors. If you want to protect your estate from unexpected risk, then you need to take advantage of some of the best asset protection strategies available today.
Why Would You Need Asset Protection?
It’s easy to think that lawsuits and unexpected creditor actions only happen to other people. In reality, however, millions of us are at risk. We live in a litigious society, and anyone who has assets may find himself a target of a lawsuit or other action. That is as true for physicians, contractors, and other entrepreneurs as it is for entertainers, politicians, and others with high net worth. To protect the assets that you worked so hard to accumulate, you need strategies that can limit your exposure. The following can provide some measure of protection:
Utilize Insurance to Limit Risk
Insurance exists to reduce individual risk by sharing it among a broader pool of policyholders. Chances are that you have a variety of different insurance policies in place to protect various aspects of your life and interests. If you’re like most people, however, there is also a good chance that you obtained your insurance coverage and then almost as quickly put it out of your mind. Few people ever conduct the kind of routine coverage and policy reviews needed to ensure that their policies provide the protection they need as their life circumstances change over time. You should carefully review all of your policies to ensure that you still have the coverage you need with deductibles that make sense in light of the risk you face. Never just assume that your insurance is still adequate for your needs.
Business Owners: Limit Your Liability
If you own a business, asset protection is critical to protect you from litigation. Many small business owners make the mistake of operating their companies without the benefit of the protection they need. If you are a sole proprietor and your business is not legally established as a Limited Liability Company or Corporation, then you may be exposing your personal assets to unnecessary risk. To be sure, sole proprietorship does have the benefit of offering a less structured approach to running a company. Unfortunately, sole proprietors who get sued can soon find that their personal assets are fair game as well. When your company is legally considered a corporation or LLC, however, such suits can only target assets owned by the business entity.
Consider Trust Advantages
Trusts can provide you with protection as well, though the general rule is that any asset that you can access is also accessible to creditors. The fact is that courts are not going to ignore assets in a trust that you are still able to control. So, if you are opting for trust benefits as a way to secure assets from creditors, bankruptcy, or possible litigation, then your best option will be some form of irrevocable trust.
One example would be a Medicaid planning trust. The assets you place into that irrevocable trust would ensure that you have a protected income stream. If you are married, that income stream would remain available for the well spouse if one of you needed to qualify for Medicaid at some point in the future. As an added benefit, the assets in this sort of trust are passed directly to heirs when you die. That protects them from Medicaid benefit recovery efforts.
The fact is that a good estate planning attorney can help you identify any one of a number of effective trust-based asset protection strategies that you can use to help safeguard the value of your estate. The important thing to remember is that trusts are complex legal matters that require the assistance of an experienced legal professional.
Making the Most of Your Plan
Effective asset protection strategies seldom rely on just one approach. Asset protection requires a balanced approach to complex issues, to ensure that everything that can be protected is protected in the best way possible. Moreover, there has to be a realistic approach to the entire process. After all, you cannot simply place everything into a trust and assume that your protection is complete.
The fact is that you cannot protect everything anyway. While you can make great strides to protect much of your estate from unexpected creditors and potential litigants, you certainly cannot simply place everything into a trust and assume that your problem is solved. Obviously, you have to maintain enough control over enough of your estate’s worth to ensure that you are solvent. Moreover, you cannot use asset protection to shield assets from legitimate claims that you already know exist, or claims that you reasonably expect to arise.
With that said, there is much that you can do to ensure that your estate and your family are protected against the unexpected. By utilizing these strategies, along with existing federal and state asset exemptions for circumstances such as bankruptcy, you can obtain the protection and peace of mind that you need.
Michigan attorneys Biddinger & Estelle, PC can be an important part of that process. Our estate planning experts have the expertise you need to identify the best asset protection strategies for your unique circumstances and the experience to ensure that your plan works for you. We’ll work with you to develop the estate plan you need, so that you’ll know that you’ve done everything you can to safeguard your assets and your future. Contact us online or give us a call at (989) 872-5601 today to learn more.
Latest posts by Rachel Pelto (see all)
- How Your Family Situation Affects Your Plans for Your Legacy - December 18, 2017
- Pros and Cons of Guardianship - December 14, 2017
- Why Do People Procrastinate About Estate Planning? - December 10, 2017