Although the primary focus of your estate plan may be how your assets will be passed down to loved ones at the end of your life, your estate plan should also help protect and grow those assets throughout your lifetime. In fact, asset protection should be an important component of your estate plan because failing to protect your assets could mean you have nothing left to pass down at the end of your life. To help you get started, a Baldwin Hills estate planning attorney at Collins Law Firm explains how to incorporate asset protection strategies into your estate plan.
Are Your Assets at Risk?
Before discussing asset protection strategies and tools, it may help to point out how your assets may be at risk so that you understand the importance of protecting them. Most people are aware of some of the more obvious threats to their assets; however, some less obvious threats could just as quickly diminish the value of your estate.
- Divorce – even in states without community property laws, a divorce could seriously threaten your assets if you do not make a conscious effort to protect them. All states acknowledge separate property in some form, usually defined as assets owned prior to marriage or inherited during the marriage. What many people do not realize, however, is that co-mingling separate property can convert it to marital property. In addition, income derived from separate property is often considered marital property.
- Spouse – you may be aware that you could be held liable for debts of your spouse; however, are you also aware that jointly held property could be lost because of a spouse’s debts or liabilities?
- Business liabilities – contrary to popular belief, incorporating a business does not always shield you from personal liability. “Piercing the corporate veil” could put your personal assets at risk for debts or liabilities of a business you own or in which you have an ownership interest.
- Long-term care – the cost of long-term care (LTC) could deplete your retirement nest egg in record time if you failed to create an estate plan that anticipates the need to cover those expenses.
- Beneficiaries – sadly, your own beneficiaries could squander your assets in short order because of a substance abuse problem, gambling habit or simply as a result of spendthrift tendencies.
Asset Protection Strategies for the Beginner
Hopefully, you are now convinced that there is a need to include asset protection strategies and tools in your comprehensive estate plan. Only your Los Angeles asset protection attorney can help you decide which strategies and tools are right for your plan; however, some common options include:
- Medicaid planning – LTC costs can be managed with Medicaid planning. Medicaid will help cover LTC costs; however, you must first qualify for benefits. To do that, you must keep non-exempt assets to a minimum. Often, that means establishing a Medicaid trust well ahead of the need to qualify for Medicaid benefits.
- Pre-marital agreement – executing a pre-marital agreement makes it clear who owns which assets in the event of a divorce or death without the need to consider the state’s marital property laws.
- Trusts – trusts can help in several ways. An irrevocable living trust can shelter assets by taking legal ownership of the assets, thereby removing them from your estate and putting them out of reach of creditors. A trust can also protect assets from spendthrift beneficiaries by controlling how and when the assets are spent.
- Business succession planning – if you own an interest in a business, you need to protect that interest and plan how the value of that interest will be passed down or sold in the event of your death. Proper planning can also significantly diminish the risk of personal liability for business debts and liabilities.
- Properly titling assets – there are several ways to hold joint title in most states, including California. The method you choose will determine things such as what happens to your interest upon your death and whether your interest is at risk because of debts of the co-owner.
Contact Collins Law Group
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns related to asset protection, consult with an experienced estate planning attorney. Contact the Collins Law Group by calling (310) 677-9787 to register for one of our FREE estate planning workshops