From shielding your property from lawsuits to using trusts as an estate planning tool, there are many different aspects to asset protection planning. Unexpected events can happen to anyone, so being proactive about protecting what you have worked hard for is vital. An experienced business liability lawyer or estate planning attorney can evaluate your specific situation and provide valuable advice on how to best protect your assets.
Why Asset Protection Planning is Important
There are various financial and legal arrangements that can keep your assets safe from creditors, lawsuits, divorce, and in other circumstances. It is important to have an asset protection plan in place before something like a lawsuit happens. If someone has already started an action or there is a judgment against you, moving assets around to avoid paying it may be considered fraudulent. The same goes for long-term care planning, which is a type of asset protection planning in which you put certain property and assets in trust to keep them from being taken to pay for nursing home care should you need it. Having an asset protection plan in place well before these types of events happen can safeguard your property and financial interests.
Common Types of Asset Protection Planning
Trusts – Placing assets in a trust legally separates you as the owner of the assets, even if you maintain an ownership interest in them. Trusts are often used in estate planning to shield assets from certain types of taxes, to avoid creditors, and when doing Medicaid planning for nursing home care. There are many different types of trusts that serve different purposes. A skilled wills and trusts attorney can determine which will best meet your needs.
Business entities – The legal formation of a business entity can protect some of your assets as well. For example, setting up a Limited Liability Corporation (LLC) can protect your personal assets in most cases.
Tenancy by entirety – If you are married and own property, placing property in a tenancy by entirety means that only one spouse fully owns the property. If there is a judgment against you, the property cannot be touched if it is in tenancy by entirety of the other spouse. It is important to note that this can complicate things in the event of a divorce.
Insurance – Sometimes, asset protection can be as simple as buying the right type and amount of insurance. However, insurance does not completely shield you from liability. For example, a physician may have malpractice insurance and operate their business as an LLC, which provides extra protection for personal assets.
There are other financial and legal tools that can be used for asset protection planning as well. Asset protection planning is not one-size-fits-all – each person’s situation is different, and there is no one course of action that can be applied to all circumstances.
At Carosella & Associates, our experienced legal team works collaboratively to help you develop an asset protection plan that is tailored to meet your individual needs.