Protecting your assets as well as your family legacy should be a vital part of solid estate planning. By creating an asset protection (or preservation) plan, you will ensure that your wealth and property are safe from any potential lawsuits or creditors.
You never wanted to be a financial burden to your family so that such planning will provide peace of mind to you and them. In establishing an asset protection plan, you can protect your family in ways that may include providing assets to a surviving spouse; maintaining assets to pay for your medical care or long-term care, and providing an inheritance to your heirs and beneficiaries.
Reposition assets as exempt
Asset protection planning requires transforming assets subject to creditors’ claims (non-exempt assets) and repositioning them as assets that are untouchable from creditors’ claims (exempt assets).
In creating a solid asset protection plan, you must firmly consider:
- Short-term and long-term financial goals: Once you’ve analyzed such goals and finalized your financial plan, you must review your current assets to see whether they are exempt from creditors. If they aren’t, you can reposition them in becoming exempt.
- Estate planning goals: Your estate plan can include asset protection planning in ways that could include irrevocable trusts for you and your family. If your assets are in a trust, they would be owned by the trust and protected from lawsuits against you.
Anticipate and create before a lawsuit
It’s best to plan ahead and anticipate. You want to make sure that you establish an asset protection plan well before any claim or lawsuit arises.
If you make a reactionary move and start working on an asset protection plan after a creditor comes after your assets or a lawsuit has been filed, you could face legal trouble. A judge will recognize this late move and ultimate deception as a fraudulent transfer.
