Ron Adams and Ryan Scharber can recommend, as part of your overall estate or business plan, a number of tested, conventional, domestic wealth preservation strategies that are tailored to your needs, circumstances and goals and can help safeguard your accumulated wealth from future creditors and predatory litigation.
Asset Protection
Asset Protection Lawyers
Who Needs to Protect Their Assets?
Wealth preservation strategies can benefit individuals in a wide variety of categories, such as:
- business owners in high-risk industries
- physicians, attorneys, accountants and other professionals vulnerable to professional liability claims
- corporate directors and officers
- high net worth persons and families who make inviting targets for predatory lawsuits.
Conventional Estate Planning Offers Little Protection
While conventional estate planning is needed by everyone, it does not provide wealth preservation.
Living (revocable) trusts can provide comfort in easing the transition of your assets from one generation to the next, reducing or avoiding estate taxes, and dealing appropriately with blended families and remarriage after death issues.
However, those trusts do not protect assets from potential creditors or predators; assets held in a living trust are just as subject to the claims of creditors as if the trust did not exist at all.
To protect assets, you may need to build other types of trusts and planning tools onto your initial living trust planning.
How It Works
In general, asset protection means taking “non-exempt” assets (i.e., assets that are subject to creditors’ claims) and repositioning them as “exempt” assets that creditors cannot touch.
Wealth preservation also includes positioning non-exempt assets in vehicles that are difficult to “break into” and cause a creditor to re-evaluate whether it is worth the time, expense and trouble of trying to pursue those protected assets.
Plan while you can: This area of law can be extremely complex, is full of pitfalls for the unwary, and is also extremely fact-specific. This is one area where “one size” definitely does not fit all. Also, there is no “quick fix” when it comes to asset protection planning; it requires an in-depth analysis of your assets, your potential liability risk factors, and your objectives. As a result, the earlier one starts the process, the better; if an unforeseen liability arises, it is too late to start planning.
Useful Tools
Asset protection planning generally incorporates tools that, when employed alone or in concert, are structured to achieve your goals and protect family wealth from the claims of creditors and predators. Those tools, which vary in their applicability and complexity, may include:
- the use of limited liability companies (LLCs) and limited partnerships;
- gifting of assets either outright or into separate, irrevocable, trusts;
- joint ownership of assets or, depending on the jurisdiction, holding assets as “tenants by the entirety”;
- transitioning non-exempt assets into exempt assets;
- the use of life insurance and annuities;
- the use of corporations, including professional corporations;
- domestic asset protection trusts; and
- dynasty trusts for the benefit of children and future generations.
Each of these tools is generally designed to protect different kinds of assets.
For example, LLCs and limited partnerships can be a great way to protect real estate investments. If structured correctly, they can also be used to protect certain liquid assets in addition to the real estate holdings. Under such a strategy, brokerage and investment accounts may be combined with real estate investments within one or more LLCs, making it much more difficult for a creditor to reach those brokerage or investment accounts.
In many cases, the gifting of assets into separate, irrevocable trusts for children and future generations is the easiest form of simple asset protection. Depending on the amount of the gift, there may need to be a determination of whether any gift tax issues arise from the gift. But once the assets are out of your hands, they become unavailable to your creditors.
The downside of gifting assets, of course, is that you can no longer use or benefit from the assets that you gave away. However, if you no longer need the assets, gifting can be a great way not only to protect those assets from creditors, but also to remove assets from your estate for estate tax purposes.
On the upside, gifting to an irrevocable trust protects the assets from your future creditors and, if the trust is properly structured, from future creditors of the trust’s beneficiaries..
Beware of Fraudulent Conveyances
Timing is critical to effective wealth preservation planning: It must be done at a time when there are no known creditor claims. The law surrounding “fraudulent conveyances” prevents a person from engaging in asset protection planning if that planning would otherwise hinder or delay the claims of known creditors. Such planning can be set aside and subject you to a potential damage claim.