Estate planning has always been about how wealth gets passed from generation to generation – but it also involves so much more. While your estate plan is, at its core, a strategy that deals with matters related to your death, it should also be a plan that addresses many life concerns. For example, a good estate plan should tackle issues related to asset protection, since there’s no use in creating a strategy to pass on wealth if you don’t have a plan to ensure that it’s there to be distributed when you die. For a variety of reasons, strategies for protecting assets are more important than ever.
What is Asset Protection?
Asset protection is a term that describes all the strategies and tools used by estate planning experts to help you secure your wealth against those forces that seek to consume it. Sometimes, this protection involves the use of complex legal strategies designed to structure your wealth in ways that reduce your liability to lawsuits or other creditor actions. At other times, it involves the use of existing liability protections like insurance. The goal is to ensure that your assets cannot be touched by creditors, litigants, and others.
Why Do You Need Asset Protection?
Many people struggle with the notion that they could ever benefit from asset protection. After all, there’s a common perception out there that assumes that only the truly wealthy ever need to worry about such things. The problem is that reality suggests otherwise. We live in the most litigious society in human history, and millions of lawsuits have been filed against people just like you. Often, litigants sue without ever considering whether the defendant has any real wealth worth pursuing.
Apart from lawsuits, there could also be future issues that you cannot even yet imagine. Greedy creditors could come after your assets at some future point in time, and a failure to provide yourself with proper asset protection could leave your personal wealth vulnerable to their claims. Divorce, bankruptcy, and other potential threats often provide little warning. You could even be in an automobile accident that leaves the other party suffering from expensive injuries. If you own a business, just one fall on your premises could strip you of everything that you own – unless you have the right kind of asset protections to safeguard your interests.
Fortunately, there are a variety of techniques and tools that can help you to secure your assets from those and other threats. To properly utilize them, however, you need to know what they are and how they can help you to shield your wealth from a world that wants to take it from you.
Maximizing Insurance
The most basic form of asset protection that you can have is insurance. That’s also the most commonly used form of protection. Most people have automobile insurance and some type of healthcare insurance to shield themselves from accident liability and large medical bills. Many homeowners also carry insurance for their houses, to protect against catastrophic damages and on-site premises liability concerns. You should always check your policies to ensure that you have the level of coverage that you need to properly protect your assets.
If you own a business or have a professional practice of some sort, you’ll need other insurance as well. Business coverage can be used to ensure that you’re protected if customers have accidents on your property, while various professional liability insurance policies can protect you if you’re a doctor, lawyer, or other professional at risk for malpractice or other suits.
Protecting Personal Assets with LLCs
Business owners should also ensure that they use the right business entity to protect their companies and their personal assets. Sole proprietorships and partnerships don’t provide the protection that you need to secure your personal wealth, since there is no line of separation between your business and personal assets. That means that an accident at the business site could result in a lawsuit that leaves your personal wealth liable as well. One way to prevent that from happening is to form a limited liability company to shield your personal assets from lawsuits, creditor actions, and other threats.
The LLC is a hybrid form of business entity that allows you to maintain the flexibility of a sole proprietorship while enjoying many of the liability protections afforded by the corporate business structure. When properly formed, an LLC enables you to limit your business liability to the investments that you have in the company. That means that anyone who sues the company will be unable to access your personal wealth. Instead, they can only gain access to property owned by the LLC.
Using Asset Protection Trusts
The asset protection trust is another important tool that you can use to safeguard your wealth, and it offers even more flexibility than insurance and many other strategies and tools. For example, you can use an irrevocable trust to protect an heir’s inheritance from his creditors or his own bad habits. You can use Medicaid trusts to shield wealth from nursing home costs, while securing eligibility for government benefits. You can use irrevocable trusts to protect wealth from the estate tax, avoid capital gains tax liability for charitable trusts, and accomplish many other important goals.
Get the Help You Need
Asset protection is extremely important in a society as prone to lawsuits as ours has long been, but it has other important benefits that cannot be ignored. If your estate plan is not already leveraging the best strategies for protecting assets, then your entire strategy could be at risk from just one unexpected lawsuit or creditor action. The good news is that you can have the asset protection strategies you need. Still, it’s important to have those plans in place before trouble appears. At the Fouts Law Group, LLC, our asset protection experts can help you to choose the right strategies for your asset security needs, and ensure that your wealth is protected against all the most common threats. To learn more about how we can help you meet your asset protection goals, contact us online or give us a call at (404) 596-7520 today.
