Everything in your life can change in an instant. A crippling accident, loss of employment, terminal illness, bankruptcy, or a financially devastating lawsuit can bring ruin to your life. While you may not be able to control life altering events, with proactive asset protection planning you can safeguard selected assets such as real property, investments, tangible personal property, and business interests. Advanced Legal Planning has the experience and expertise to create a customized asset protection plan by using irrevocable asset protection trusts, business entities, pre-nuptial and post-nuptial marital agreements, and other contract arrangements.
Who Is At Risk?
Even if you are not at fault, fraudulent claims and frivolous lawsuits can be brought against you and threaten your resources. We are prepared to use tried and true methods and innovative approaches to protect your assets in case any of the following types of lawsuits are levied against you:
- Claims made by a present or former partner or spouse
- Personal liability lawsuits brought by business associates
- Workplace lawsuits
- Premises liability suits for personal injury
- Vehicle accident suits for personal injury
- Debts of others you have guaranteed
- Fraudulent claims that cannot be disproven
- Malpractice liability claims
How Can You Protect Yourself?
We have many ways of legally protecting your assets. It is imperative that this work is done before your assets are directly threatened. Once you know of a pending suit, the law will restrict what you are allowed to protect. Together we will design the most practical and appropriate strategy to protect your assets.
You may have heard of Domestic Asset Protection Trusts, Off Shore Trusts, or Medicaid Asset Protection Trusts. These are all examples of Irrevocable Asset Protection Trusts. What these trusts are designed to do and how effective any of these trusts are depends on the provisions built into them. It is the attorney’s job to counsel with the client to balance the client’s goals of asset protection, control (or loss thereof), and tax consequences.
Premarital and Postmarital agreements are often used to legally define the ownership of property and any death related claims to property. These are very useful tools in blended families and to protect assets for children when one spouse dies and the surviving spouse remarries.
Business entities are a good tool to insulate business interests and investments. Limited liability structures isolate personal wealth when the business comes under attack. If ownership is structured properly, it is also possible to protect business assets when your personal assets come under attack.
While gifting outright leaves assets at risk, gifting in trust is a very valuable asset protection tool. The assets are removed from your ownership so they are protected from the grantor’s creditors and predators. However, the assets are still not owned by any beneficiary so they are protected from their creditors and predators. You may retain the assets in trust or distribute them at such times and in such amounts, as you see fit. If structured properly, you can control the assets and even retain an income stream for yourself after giving them away.
Providing protection for assets you leave for a beneficiary is a lot easier than providing protections for yourself.
- Spendthrift Trusts – If you leave assets outright, those assets are at risk. Rather than leave those assets open to legal attack due to divorce, lawsuits, and bad decisions; you can leave the assets in a trust designed to protect them. Your attorney should counsel with you on the balance between protection and control for your beneficiary.
- Special Needs Trusts – You may wish to provide for someone who is disabled. Care must be taken or your loved one will lose financial and medical government assistance. This requires a trust with special provisions that work within the legal framework established by Medicaid and the Social Security Administration.
Insurance may be an integral part of an estate plan. Advanced Legal Planning is not an insurance provider. However, we encourage reviewing insurance coverage regularly. Types of insurance to consider are umbrella policies for business, cyber security insurance for business, I.D. theft insurance, and Long Term Care insurance. In particular, we find that Long Term Care insurance and the effect it can have on preserving assets is often overlooked. If you don’t have an insurance provider, Advanced Legal Planning would be happy to make a recommendation.
IRAs, 401(k)s, and 403(b) plans are protected in lawsuits and bankruptcy. However, nationwide, on average, once a person dies and leaves retirement assets to an heir, the assets he or she spent an entire lifetime accumulating are spent within eighteen (18) months. If structured properly, these assets can be protected until the recipient is mature enough to manage them. Sometimes it is even possible to retain their tax advantaged status for years to come.
Section 529 College Savings Plans are another form of gifting protection. The funds are placed in a protected, tax advantaged pool for a child’s education. No matter what happens to a parent’s assets, the child will have money to pay for college. However, even though this account is asset protected, it may be accessed by the family if needed. If the child does not want to go to college, there is a lot of flexibility in what education the plan can pay for (i.e. trade school). The penalty for withdrawing the money is only 10% of the earnings on the account (not the account total).
How to Proceed
It is important to remember that if you ever need to use the protections of an asset protection plan, the structure of all of the assets will be scrutinized by future creditors, claimants, and courts. For your plan to succeed, it is important to receive counsel and assistance from a competent asset protection attorney.
Case #1
Matthew Wanted To Make Sure That If He Ever Got Sued, His Children Would Be Able To Go To College. He Also Wanted To Protect His Business So That His Children Could Benefit From It, Even If They Didn’t Want To Run It. Matthew Came To Advanced Legal Planning For Help.
Now, Matthew Has A Fully Funded Section 529 College Savings Plan For Each Of His Children. Matthew’s Business Has Been Placed In An Asset Protection Trust That Matthew Controls. His Children Are Still Too Young To Determine If Any Of Them Will Be Involved Directly With The Business, But The Asset Protection Plan Is Flexible Enough That Matthew Can Change The Management Of The Business, Change Who Will Manage The Trust, And Determine Who Will Benefit From Each. If Something Were To Happen To Matthew Now, One Of His Key Employees Would Take Over Management Of The Company And His Brother Would Take Over Management Of The Trust Until His Children Are Mature Enough To Make Decisions Regarding The Trust And The Business.
None Of The Actions Matthew Took Resulted In Any Tax Consequences.
Case #2
Sherry’s Husband, Walter, Died. Sherry Received Life Insurance Proceeds. She Paid Off Her Home And Put The Rest In Investments. She Is Now Living Comfortably With The Income From Her 401(K) And The Investments She Made.
Sherry Is About To Get Remarried. Her New Husband, Bob, Has Struggled Financially And Has Two Children. After The Marriage, Bob Will Move In With Sherry. Sherry Came To Advanced Legal Planning For Help.
Sherry Wanted To Make Sure That The Investments She Purchased With Walter’s Life Insurance Will Go To Her Three Children And Not To Bob Or His Children. She Wanted To Make Sure Bob Could Live In Their Home, But That It Would Be Protected From Legal Attack And Eventually Go To Her Children. One Of Sherry’s Children Has Struggled With A Gambling Addiction So She Doesn’t Want Him To Have Control Over Anything She Leaves Behind.
Now, Sherry’s Investments Are In An Asset Protection Trust. Sherry Can Still Receive All Of The Income From The Investments, But The Principle Of The Investments Is Protected For Her Children. If Anything Happens To Sherry, The Investment Assets Will Be Placed Into Three Separate Trusts For Her Children. Two Of The Children Will Manage Their Own Trusts, However, The Trust For The Child With The Gambling Addiction Will Be Managed By Her Other Children. If Managing The Trust For Their Brother Is Too Much Of A Problem For Their Time Or Their Relationships, They Can Allow A Professional Fiduciary To Take Over.
Sherry Also Moved Her Home Into The Trust. Even Though She No Longer “Owns” The Home, She Controls It And Is Able To Live In It. If Anything Happens To Her, The Home Will Be Placed In Trust For Bob For His Lifetime And Then Go To The Trusts That Already Hold The Investments For Her Children.
None Of The Actions Sherry Took Had Any Tax Consequences.