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Asset protection in estate planning: get experienced legal advice

Estate planning is a very individual undertaking, and must be done according to the unique circumstances and goals of each person. At the same time, there are certain issues that should always be taken into consideration in estate planning. One of them is asset protection.

Asset protection in the context of estate planning means protecting one’s estate from potential liabilities. It should include, as necessary, protecting the estate from creditor claims stemming from business and professional liabilities, death and inheritance taxes. It can also include protecting the estate from depletion by long-term care costs, as in Medicaid planning, and protecting the inheritance of special needs family members from creditor claims. 

Asset protection planning is especially important for professionals, real estate investors, and business owners, all of whom are particularly vulnerable to creditor claims on their estate. There are a number of strategies professionals and business owners can use for asset protection planning, including property and liability insurance, restructuring of business assets after claims arise, or even the use of captive insurance companies.

In the context of estate planning, one particularly useful tool is the asset protection trust. An asset protection trust is an irrevocable trust set up so that the creator of the trust no longer has legal ownership or control of the assets placed in the trust. Irrevocable trusts, by definition, may not be modified later on because of the change in ownership. This means that creditors of the trust creator may not pursue those assets, since the owner effectively relinquishes ownership.

Irrevocable trusts, carefully set up and prudently used, can provide assets protection, though they re not always the best tool for protection of business assets. Working with an experienced attorney is critical to come up with a comprehensive plan to protect estate assets from claims. In our next post, we’ll continue looking at this topic, particularly some important asset protection considerations

Sources:                    

Forbes, “Most Family Businesses Mistakenly Lack Formal Asset Protection Plans,” Russ Alan Prince, Feb. 13, 2017.

Forbes, “Ten Rules For Asset Protection Planning,” Jay Adkisson, Jul. 13, 2011. 

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