Asset protection planning is a process that includes a variety of methods to do one simple thing – protect your assets from creditor claims down the road.
As an individual and possibly as a business owner you have collected assets over the years with the ultimate goal of living well in the future and, if applicable, passing something on to your heirs. Unfortunately you never know what’s going to occur down the road. You may find yourself in a position where creditors choose to file claims against you. If these claims turn out to be legitimate, the assets you have built up over the years may be in danger.
Because the future is an unknown, there are steps you can and should be taking right now to protect these assets. If you wait until a claim is filed against you it may be too late to protect your assets.
Some of the strategies you can take now to protect your assets in the future are obtaining the proper insurance, titling assets appropriately, creating a retirement plan, and structuring your business assets correctly.
Start with insurance – the simplest and most common form of asset protection. Auto, home and life insurance are basics. But you should also consider other types of insurance, including malpractice (if it’s appropriate for your work), fire, casualty, liability, personal umbrella and, if you are running a business, officers and directors liability insurance.
As far as titling an asset, you can consider having the majority of family assets in someone else’s name – a spouse or some other trusted relative. An irrevocable trust is another possible asset owner. As you might suspect, retitling assets in someone else’s name or some entity name should be carefully considered.
Retirement plans, including 401ks, IRAs and other methods are excellent ways to protect your income and assets. Inherited retirement assets are not necessarily protected from creditors of the beneficiary who inherits those assets however. There are ways to protect retirement assets in the hands of beneficiaries as well.
If you own a company, how that company is structured can help you protect you and your business from creditors. The options include different types of corporations, a limited liability company or some combination.
This is just a sampling of some of the things you can and should be doing to protect your assets. One thing is certain. It is an extremely complicated process – one that you should not consider doing without some legal guidance. I would be glad to help guide you through these critical and necessary procedures.