Why Should You Engage in Asset Protection Estate Planning?
By: Barry E. Haimo, Esq.
May 19, 2015
HAIMO: Asset protection and estate planning overlap significantly. Most frequently, a well-insulated asset protection plan utilizes business entities and trusts. And the estate plan should incorporate the asset protection plan, so as the business succession and/or assets are provided for to avoid probate and guardianship proceedings.
Asset protection plays an important role in the estate planning process.
Simply put, asset protection plans are designed to shield your property from creditors. A strong asset protection plan can help shield your assets and business from lawsuits. In the context of estate planning, this ensures that your assets pass safely to your heirs and beneficiaries under the terms you laid out in your estate plan.
Who is Asset Protection For?
Asset protection isn’t for everyone, although it can help many people to meet the goals laid out in their estate plan.
You may need an asset protection plan if you are:
- A person with a high net worth
- A business owner
- A person at risk for being sued
- An individual with children from a previous marriage
- Professionals (such as accountants, doctors, and lawyers)
Without a solid asset protection plan incorporated into your estate plan, your assets are vulnerable to any creditors or unforeseen lawsuits. Professionals, business and property owners, wealthy individuals, or people with imminent financial, medical, or legal problems all can benefit from developing a comprehensive asset protection plan.
Asset Protection in Estate Planning
Advanced estate planning techniques integrate asset protection. This might include setting up an irrevocable living trust for you, your family, and other beneficiaries. A limited liability company may also be set up to protect your assets from creditors. In addition, qualified retirement accounts, life insurance, annuities, homestead and business entities should be employed.
Asset Protection Trusts. During the course of your estate planning, your attorney may suggest setting up an asset protection trust. This is an arrangement in which one person or entity (the trustee) has legal title to the assets (in other words, control of them) for the benefit of another.
By putting your assets in an asset protection trust, you no longer have any legal title to the property therein. As such, a creditor cannot access the assets in the trust in order to satisfy a judgement against you. Thus, your assets can remain intact for the benefit of your heirs.
There are advantages and disadvantages to this option, so it is important to consult with a knowledgeable Florida estate planning attorney to determine if this is the best option for you.
Limited Liability Companies. A limited liability company (LLC) is another tool that can be used in estate planning to protect assets. An LLC is a corporate entity that is legally separate from the owners who are referred to as “members.”
An LLC is primarily set up for a business purpose, but it can also be used to shield your assets from creditors. LLCs can hold property as well as buy and sell it. The members control and benefit from the LLC, but the titles to the assets therein remain in the company.
Asset protection is only one of many estate planning tools that can ensure the smooth transition of your estate to your heirs and beneficiaries. Get in touch with us to begin crafting an effective and comprehensive estate plan.
Barry E. Haimo, Esq.
Strategic Planning With Purpose
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