When Is The Best Time To Start Asset Protection Planning?
You should start asset protection planning as soon as possible. The best time to establish your asset protection plan is before problems arise. For example, if you are a doctor, before you start taking high risk patients who might sue you; if you are a lawyer, before you take the big case that could result in a malpractice case; a business owner, before you do anything. Hopefully you can establish your asset protection plan before potential liabilities arise, so that you have everything settled and all your ducks are in a row. The goal is to avoid even the appearance of impropriety, especially if a judge were to look at that later on in court.
What Happens If I Wait Until I Actually Need Asset Protection?
The danger in waiting too long – for example, when a lawsuit is filed – is that judges will look at timeline of events. If they see someone clearly moving things around in anticipation of getting a judgment against them, they are likely to hold that party in contempt. Contempt is not something to be viewed lightly, and can range from fines to jail time and asset seizure. The additional danger is that if you declare bankruptcy after having that judgment discharged, a bankruptcy court is going to see evidence of potential fraud and they are likely not going to discharge the debt. You may be held in contempt and be punished for the appearance of impropriety, and still must pay that debt off.
Is It Beneficial To Combine An Estate Plan With Asset Protection Planning?
It is incredibly important and beneficial to combine estate planning with asset protection. If someone is going to embark on an asset protection structure, it needs to be in sync with their estate plan and hopefully put together by the same team. You want them to operate together so that when it comes time to probate the estate and distribute assets, there is no potential legal conflict with the trust. There are so many ways that you can take advantage of good asset protection techniques in your estate plan, so it is important not to let those advantages go to waste.
What Are The Steps Involved In Asset Protection Planning?
The first step is sitting down with your financial advisor and your attorney and figure out what your assets are and what are the best ways to protect them. This can often include transferring assets into a retirement account, setting up a trust, setting up certain corporate structures which allow you to transfer shares, or even having captive insurance. There are any number of options to maximize your asset protection while giving you as much lifetime benefit as possible from your own assets. The final step is going to be that transfer. That process requires a lot of advanced planning, and might take months to get everything in place. Our firm keeps up with the law, making sure that we are taking advantage of all the correct rules, laws, and procedures to maximize your asset protection in the long run.
What Is An Asset Protection Trust?
“Asset protection trust” is a blanket term used to describe a trust where someone puts an asset in a trust for the benefit of someone else, for the purpose of shielding the asset from legal claims. By transferring that longer term benefit to a third party, likely a spouse, a child, another relative or even a charity, the transferor breaks up ownership and it makes it harder for claims to be collected against that trust. Additionally, it gives that benefit of allowing the transferor to use that property during their lifetime.
For example, if you transfer a house to a trust, you may still live in that property, you may still maintain the property, and it might not be any different than it was the day before the transfer. You still get to enjoy it. You might even enjoy it despite having that judgment or having that bankruptcy against you. The same is true for other types of assets that might be transferred to the trust. With good planning, good understanding of state law, and adherence to all the correct rules and procedures, an asset protection trust is actually a great tool.
Will I Lose Control Of My Assets?
Yes, you will lose some degree of control over assets you place in trust. It is important to think about ownership in two different ways. One part of ownership is the ability to use the asset. In that way, an irrevocable trust allows you to maintain this as you can structure it so that you can use the property. The other part of ownership that we look at is the equitable ownership under the law. That is the power to make long term legal changes to the status of an asset. You will likely have to give up part of your equitable ownership of property placed in an asset protection trust.
As part of transferring an asset to an irrevocable trust, you will likely give up the equitable control fo the property to a trustee, who has the power to do some legal transactions on regarding the property, to the extent allowed by the trust.
For more information on Starting Asset Protection Planning, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (404) 939-7562 today.
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