Two weeks ago we started a three-part series on estate planning. As a recap – we’re discussing the following three subject areas:
- Wills and Trusts – these documents include your wishes for asset distribution upon your passing, and typically incorporate powers of attorney and a living will.
- Asset Protection – ensure your assets are preserved for beneficiaries or heirs; specifically, safeguarding from creditors of your estate.
- Estate Tax Planning - having a plan to reduce estate taxes if your family is in an estate tax paying situation (currently just over $12M for an individual or $24M for married couples) can help maximize your gifts or transfers to heirs. Certain trusts or charitable giving strategies can significantly impact the amount owed on your estate.
This week we review asset protection.
Asset protection is the practice of providing certain assurances that assets do not become subject to the judgment of outside creditors. It is important to plan for asset protection while living and once deceased. Some strategies used for asset protection include:
- Irrevocable Trust – this trust allows an appointed person (trustee) to manage the assets for beneficiaries. It removes control and ownership of the asset, which is typically the basis for the creditor’s ability to attach assets in a lawsuit.
- LLC or Family Limited Partnership (FLP) – establishing an LLC or FLP can transfer the ownership of the asset to the entity. An FLP allows members and spouses to maintain a small percentage of ownership in the partnership, while still controlling the entire partnership.
- Insurance Policies – business, personal/umbrella, home and auto, life, and disability insurance policies (just to name a few) help to cover certain assets from lawsuits or accidents.
Estate planning incorporates these asset protection strategies to ensure the safeguarding of assets once you die. The overlap between estate planning and asset protection is very important when drafting a will for anyone who owns real estate, stocks, businesses or other tangible property.
Let us know if you’d like to review your estate plan.
Matt and Andrew