Tips for Asset Protection
14 Apr Tips for Asset Protection
Posted at 06:15h
Asset Protection
We go into more detail on how to protect your personal assets and go over a few asset protection strategies.Who Needs Asset Protection?
Asset protection involves strategies to safeguard your wealth from creditors,
lawsuits
, and other potential legal claims. Asset protection involves strategies to safeguard your wealth from creditors, lawsuits, and other potential legal claims. It’s important for those with large estates and those in high-risk occupations. Lawyers, consultants, insurance agents, software developers and contractors, landlords and medical professionals, for example, are at a greater risk of being sued.
Asset Protection Planning and Strategies
Insurance often plays an important role in asset protection. Umbrella insurance provides additional liability coverage while
professional insurance liability protects assets against claims related your profession. Insurance is not always enough. If you want to protect your personal wealth or your children’s inheritance, there are other legal steps you can take.There are many ways to approach asset protection, but in estate planning we focus on three main structures:
Irrevocable Trusts
- Limited Liability Companies (LLCs)
- Family Limited Partnerships (FLPs)
- Let’s take a closer look at each of these methods, and the situations where they apply.
1: Irrevocable Trusts
Establishing a trust is a step that
many families can benefit from, even if they don’t have a large amount of wealth. Establishing an irrevocable trust is a step that many families can benefit from, even if they don’t have a lot of wealth. Setting up a lifetime assets protection trust, for example, is a great method to protect the inheritance of your children. If you are worried that your wealth could be at risk from lawsuits or creditors you can create an irrevocable trust
in order to legally separate your assets and yourself. By transferring ownership of the assets to the trust you effectively remove yourself as the legal owner. This will prevent creditors or lawsuits from pursuing assets in an irrevocable estate. Appoint a trustee you can trust, rather than yourself. Assuming the role of trustee for an irrevocable will could undermine its purpose, and expose your assets to possible collections. It is safer to have someone you trust manage your assets. Limited Liability Corporation:
2: Forming a LLC
A-
Limited Liability Corporation The LLC protects its members (or owners) from personal liability. In the event of bankruptcy, their personal assets are not seized. Tax benefits are also offered by LLCs, since members can deduct business-related expenses and report their share of profits or losses in their individual tax returns. Also, LLCs offer estate planning benefits, such as the ability to give shares to beneficiaries free of income or estate tax. 3: Forming a FLP
When a family wants to pool resources in order to run a business, they can create a Family Limited Partnership. It’s a good idea to start an FLP if you want to protect personal assets from business liability, reduce the risk for personal lawsuits and plan a smooth transfer of wealth to your children. This strategy works especially well for families that hold significant business assets (like real estate or shares in the business) and want to create a solid structure for long-term management.
For example, let’s say several siblings want to open a restaurant together. They consider putting the assets of their business in an FLP. The FLP will protect the assets of the company from creditors. They cannot be held personally responsible for any business debts that exceed the amount invested in capital. This will be particularly useful if a restaurant ever faces financial difficulties or lawsuits.
Another advantage of an FLP is that it can reduce estate taxes by transferring wealth from one generation to the next. If one of the siblings owning shares in the restaurant dies, the shares can be transferred to the children. We can help you protect your assets if you live in Arizona. Phelps LaClair’s legal team can help you set up an irrevocable estate trust, an LLC, or use other asset preservation strategies to preserve wealth for your heirs. We will design a solid estate plan that is customized to your needs and we will meet with you regularly for reviews to make sure it still meets all of your requirements. Call us at 480-892-2488 today to get started with a free consultation.
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Photo taken by Yolanda Jost
from
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