What Is Asset Protection Planning?
Asset protection planning is a type of planning that attempts to place a shield around someone’s assets so that, in the event that person is hit with lawsuits, financial difficulties or other hazards of the modern-day world, their assets will be safe and not lost.
Today’s society has become very litigious. Anyone who believes they have been injured or wronged will always fault someone else for it. Lawsuits are out of control and people need to be cognizant of this. This is why people should want and need to protect their assets; to keep them from being lost to any kind of litigation.
The benefits of asset protection planning are very simple if done correctly; if someone is sued or suffers another kind of disaster, their assets will be protected from being lost should something unfortunate happen.
Is It Legal to Shield Assets From Creditors?
It is absolutely legal to shield assets from creditors. It would be no different than if someone went to their CPA to help them plan to pay lower taxes by taking advantage of legal tax loopholes. Asset protection planning is not considered hiding or concealing assets; it simply uses the laws currently in place to allow assets to be protected.
Does A Revocable Living Trust Count As Asset Protection?
Revocable trusts do not constitute asset protection. They are used primarily as a vehicle to avoid probate at death. During someone’s lifetime, they do not provide any protection from lawsuits or financial difficulties.
When Would Be The Best Time To Start Asset Protection Planning?
The best time to start asset protection planning is always before a problem arises. In other words, it is best to begin preparation well before someone threatens to or actually does file a lawsuit against you. Once an issue arises, asset protection will become much more difficult and there will be fewer remedies available.
Depending on the complexity of the plan and how long it will take to move the assets into a protected environment such as an asset protection trust, the length of time asset protection takes can vary greatly. Realistically, we can usually set up the entire plan within a few months at most. New assets accumulated over time may continue to be added to the asset protection plan, so the planning may not be a single step; it may be an ongoing process over many years.
Why Can’t Assets Just Be Transferred To The Spouse And Children?
It’s possible to transfer assets to either a spouse and/or to children. Once the transfer had been made, those assets will be protected. For example, if someone has transferred assets to a spouse and is sued years later, provided everything was done properly, those assets would be safe.
One problem that can arise with transferring assets to a spouse or children is that assets are then under their control, not whoever initially owned them. The second issue that can occur is a lesson learned by many doctors in years past who were concerned about being sued for malpractice; when they decided to transfer all of their assets into their wife’s name, the plan worked very well. However, a few years later, when the wife filed for divorce, she was then able to walk away with a disproportionate share of what he had given her.
Will Asset Protection Plans Eliminate or Lessen Taxes?
Asset protection plans have no effect on taxes. The purpose of asset protection planning is to protect assets from lawsuits, judgments and other vulnerabilities a person might have. They will generally be tax-neutral; which means the same taxes will have to be paid with or without the protection plan in place.
For more information on Asset Protection Planning, a free initial consultation is your next best step. Get the information and legal answers you’re seeking by calling (314) 542-2210 today.
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