In today’s world, anyone can be a party to a lawsuit. It can be due to unfortunate situations, such as credit card debts, car accidents in which you’re the negligent driver, bank foreclosures, and a lot more. This means that when someone files a civil action and wins a monetary judgment against you, you must pay everything off, which, in turn, can get you bankrupt in the long run.
Therefore, if you want to preserve your wealth for your family’s next generation and keep them away from your creditors and court judgments, consider the idea of asset protection planning.
Here are pertinent facts you should know about asset protection planning and why it’s important:
Asset Protection Planning: What Is It?
In its simplest terms, asset protection planning refers to a process that involves the use of tools and strategies for the protection of the individuals’ assets and their families against any lawsuits and creditors. It consists of different financial arrangements and structures you can perform to keep your assets protected from nearly all unfortunate circumstances. These include:
- Trusts – This financial structure requires you to surrender the asset’s control to someone else, particularly your beneficiary. As a result, you and your properties become separate under the law, even if the ownership interest remains in you. If you’re looking for someone who can assist you in asset protection planning, an estate planning attorney can be of great help. They have valuable skills and expertise to execute your trust agreements and other plans for the sake of your family’s financial future.
- Limited Liability Company – If you’re a business owner, this type of asset protection planning can be a great way to keep your assets safe from the lawsuits and creditors. Ideally, limited liability corporation refers to a type of company setup wherein in case the organization has liabilities to pay, the creditors or the judgment holder can’t run after your personal assets. They can only reach the LLC assets, which means that what you have under your personal capacity are safe.
- Placement Of Assets Under The Spouse’s Name – This is another type of asset protection, which provides that if there’s a monetary judgment against you, the properties under your spouse can’t be taken away. These are protected from the creditors and lawsuits charged against you.
Asset Protection Planning: Why Is It Important?
By now, you already know what asset protection planning is. Hence, it’s time to explore the importance of using this method and incorporating it into the elements of financial planning. Below are the reasons why asset protection planning is crucial:
- Reduces The Exposure Of Your Assets From Lawsuits – When you do asset protection planning, you can rest, knowing that all your assets and properties are protected from a lawsuit. This means that it’ll be hard for anyone, including the creditor, to sue you and execute a monetary judgment against you. Luckily, a dedicated lawyer can check your asset arrangements and identify which among them are susceptible to a lawsuit.
- Protects Your Assets In Case Of Incapacity – Ideally, being incapacitated doesn’t allow you to administer your assets correctly, and, as a result, you might sustain substantial losses over time. This is where asset protection comes into play. You can protect your wealth by having someone appointed to manage your properties for you. You can do this by executing a living trust or a power of attorney to safeguard your assets in case you become incapacitated.
- Protects Your Assets In Situations Excluded By Your Insurance Policy – It’s important to know that not all insurance policies cover all circumstances and assets because they come with exclusions. When this happens, your assets will be put at risk in case your insurance can’t cover a liability-creating event. Because of this, it’s an excellent idea to do asset protection planning to make sure assets not covered by the insurance are still safe and protected.
- Prevents Losses Due To Estate Tax – Leaving your assets to your heirs upon your death means estate taxes will be assessed, which will significantly lower the value of their inheritance. If you don’t want this to happen, having a good asset protection plan can be a great idea. It can help ensure that even if there are estate taxes to be paid, the inheritance will not be reduced to a significant amount. To navigate this process correctly, hiring a certified estate planning attorney can help. Using their knowledge and skills, they know exactly what to do to safeguard your properties and preserve them to your loved ones after you die.
Since you’ve worked hard to accumulate all your assets, you have the right to shield them so you can enjoy financial stability during your old age, and, more importantly, ensure your family’s future upon your demise.
Therefore, if you don’t want to put to waste everything you’ve built, keep this information in mind and start creating your asset protection plan with the help of an attorney before it becomes too late.