A tragedy can occur at any moment, so it is important to be proactive and protect yourself, your family, and your assets well in advance. One way to protect yourself and your affairs is through Asset Protection.
When it comes to protecting their affairs, most people are more aware and have a better understanding of estate planning compared to asset protection. While estate planning and asset protection are similar, estate planning is more focused on protecting your assets and affairs after you die or become incapacitated. Asset protection, on the other hand, is focused on protecting your businesses, properties, and stocks from creditors, lawsuits, seizures, and other losses before and after death. Unfortunately, a common misconception about asset protection is that it involves some kind of criminal activity, but that is not the case. In reality, it is legal, and by protecting your assets before a tragedy occurs, you can avoid losing them to creditors or lawsuits without having to engage in fraudulent or illegal activities.
There are a few tactics that you can use to protect your assets.
Shifting Vulnerable Assets Out of Your Name
You can shift your assets out of your name by giving them to others as a gift. This helps protect your most valuable and vulnerable assets from creditors, while also potentially reducing taxes on your assets. To shift vulnerable assets out of your name, you can exchange your property for an installment sale note that is payable over a number of years. You can use a bypass generation gift to accelerate your gift and to avoid a generation-skipping transfer tax, you can use a generation-skipping trust. Another option is to transfer your property to a minor child through a children’s or minor’s trust. It is important to know that with this option, your assets will not be completely protected if the transfer is fraudulent, so take care to make sure the transfer is legal.
If you are going to be receiving a large inheritance, you can pass your inheritance to someone else to protect it from being taken by creditors. You can designate your inheritance to whoever you see fit, whether that be your children, spouse, or a friend. In order to disclaim your inheritance, you must put your disclaimer in writing, not accept any part of the inheritance, and the disclaimer must be received within 9 months of the date of transfer or the date that the gift is made. To protect your beneficiaries of the inheritance and avoid creditors, you can change your will to direct the inheritances to a protective entity like an offshore asset protection trust or an LLC.
Lawsuit Proof Your Estate
There is a chance that debts can exceed your assets when you die or you can be sued after death. To protect your assets and pass them to your heirs without worrying about creditors or lawsuits, you can lawsuit proof your estate. This can be done by titling your property jointly with right of survivorship to your intended heir, which would allow the property to pass to the heir free of the creditor claims. You can also title your property to an irrevocable trust fund before you have creditors or accelerate the lifetime gifts to deplete your estate. Another option would be to make financial investments that would turn your wealth into an income stream that becomes debt-free for your heirs.
Overall, it is incredibly important to protect your assets in advance, because you never know when a tragedy will occur. Asset protection is something that everyone should take the time to do, no matter how much money you make or how many assets you have. If you decide to be reactive instead of proactive, you run the risk of losing your most valuable assets. Call us today to learn more about the different options you have to protect your assets.