Asset protection planning is an important step in the estate planning process, regardless of age, health, and wealth. This is because proper asset protection strategies can help ensure your surviving family and friends will have access to the financial support they may need while minimizing the potential stress and problems that may arise after you pass. Asset protection planning can also protect you and your assets while you are alive. Asset protection serves as a barrier between you and your creditors if you are getting sued or are going through a divorce.
For business owners, asset protection planning is particularly important given today’s litigious society. As you accumulate wealth and assets, you become the target of creditors and predators.
There are many different techniques that can be used to protect different types of assets. All asset protection techniques have one thing in common: They each make it more difficult for a creditor to find or take assets. Asset protection strategies include the use of business entities, trusts, and partnerships to protect your assets in the event of a lawsuit. A proper asset protection plan complements your insurance to more effectively satisfy creditors.
At Kierman Law, PLLC, we work hard to understand each client’s individual concerns and goals. Contact us to begin working on the best asset protection planning strategies for your life and your family.
Asset Protection Strategies
|Strategy||Beneficiary?||When are the Assets Protected?||Features of Strategy|
(property, auto, business, etc.)
|Client||During Client’s Lifetime||First line of defense against liability. In order to be effective, ensure that policy limits are in line with current assets and net worth. Also, confirm that coverage is still adequate.|
|Tenants by Entirety||Client||During Client’s Lifetime||In applicable states, this type of ownership between a married couple protects the property from the creditors of one of the spouses. Depending upon your state law, this may be limited to real property.|
|Investing in Retirement Accounts||Client||During Client’s Lifetime||401(k)s and IRAs (excluding inherited IRAs) are protected from creditors in bankruptcy (with certain limitations). In addition to protecting these assets, you are also growing your retirement fund.|
|Domestic Asset Protection Trust (DAPT)||Client||During Client’s Lifetime||Allows you to fund the trust with your own property, maintain an interest in the trust as a beneficiary, and protect the trust’s assets from your creditors. Only allowed in states with DAPT statutes.|
|Spousal Lifetime Access Trust (SLAT)||Spouse||During Client’s Lifetime||A trust established for the benefit of your spouse. Should you be sued, these funds are not available to creditors and can be used by your spouse to support the family.|
|Lifetime Qualified Terminal Interest Property (QTIP) Trust||Spouse||During Client’s Lifetime and At Client’s Death||During the less wealthy spouse’s lifetime, they will receive all income and possibly the principal. If the less wealthy spouse dies first, assets will be included in their estate, making use of their estate tax exemption. Funds may continue for the benefit of the surviving spouse and distributed to the wealthier spouse’s chosen heirs.|
|Discretionary Trust||Spouse and/or Children||During Client’s Lifetime and At Client’s Death||Funds are held and invested by a trustee and are only distributed on a discretionary basis according to your stated wishes. Can be a standalone trust but can also be incorporated with other trusts.|
|Credit Shelter Trust||Spouse||At Client’s Death||Spouse is the beneficiary of the trust, but it is not considered a part of his or her estate. If the surviving spouse remarries, the assets cannot be commingled with those of a new spouse.|
|Irrevocable Life Insurance Trust (ILIT)||Spouse and/or Children||At Client’s Death||Holds life insurance proceeds for the intended beneficiaries as opposed to distributing them outright. Can also provide liquidity for owners of illiquid assets (farms, businesses, etc.).|
|Standalone Retirement Trust (SRT)||Children||At Client’s Death||Holds an inherited IRA, or other qualified retirement account, for the benefit of a named individual(s). Protects the inherited account from the beneficiary’s creditors because the beneficiary is only entitled to distributions according to the trust terms.|
|Inheritor’s Trust||Children/Grand-children||At Client’s Death||Gives the beneficiary control over the assets while allowing for protection from creditors. Beneficiary will have the power to appoint or remove the trustee and replace the trustee with a different one. The trustee has the authority to make distributions.|
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