Asset Protection Strategies in Estate Planning
Effective estate planning and asset protection are essentials you need to secure your future and that of your loved ones. Our step-by-step guide will take you through the necessary stages of estate planning for asset protection. Plus, we delve into the importance of seeking professional advice, how to choose competent help, and an attorney’s role in making sure your planning is foolproof. Whether you’re a high-net-worth individual, a middle-income family, or a small business owner, there’s meaningful insight here for everyone.
If you are new to estate planning or want to deepen your knowledge, register for a free estate planning seminar to hear from the professional estate planners at Craig Associates, PC, and learn more about asset protection. You can also call our Asheville office at (828) 258-2888 for an initial case evaluation to secure your financial legacy.
- Why choose us?
- Glossary
Why choose us?
- We are committed to bringing your life together—that’s our motto. Let us be the law firm you can count on to understand your unique needs and bring you peace of mind.
- Founded in 2005, Craig Associates, PC has served North Carolina for over 18 years
- Christopher M. Craig holds active membership in the North Carolina Bar Association and the 18th and 28th Judicial District Bars, ensuring you receive expert legal counsel from a qualified professional.
Legalese for asset protection.
Creditor: A person or organization to whom money is owed by a debtor.
FLP: Family Limited Partnership, a type of business entity used for estate planning to manage family assets.
Retirement: The period in life when one chooses to permanently leave the workforce behind.
Partner: Someone who shares or is associated with another in some action or endeavor; sharer; associate.
Medicaid: A social health care program for families and individuals with low income and limited resources in the United States.
Financial Advisor: A professional who provides financial services and advice to clients based on their financial situation.
Domestic: Pertaining to the home, the household, household affairs, or the family.
Limited Partners: Investors in a partnership whose liability is limited to the amount of their investment.
Trust Property: Assets, such as money, real estate, or other wealth, that are held within a trust for the benefit of the beneficiaries.
General Partner: A member of a partnership who has unlimited liability and is responsible for managing the partnership.
Financial Advice: Recommendations provided by a financial advisor or other professional on managing money and investment decisions.
Legal Documents: Official papers that explain, verify, or are used to enforce legal relationships, rights, and obligations.
Tax Implications: The impact of financial transactions or situations on one’s tax liability.
Probates: The legal process wherein a will is reviewed to determine whether it is valid and authentic.
Registered Investment Adviser (RIA): Registered Investment Advisers help high-net-worth individuals with investments and manage their portfolios.
Tenancy by the Entirety: A type of joint ownership in common law systems, usually between spouses, that provides survivorship rights to the co-owner.
Survivorship: The right of a surviving joint tenant or spouse to inherit the entirety of the property upon the death of the other tenant/spouse.
Bankruptcy Laws: Legal statutes that govern the process through which individuals or businesses that are unable to repay debts to creditors can seek relief.
Trust Laws: The body of law that governs the creation, protection, and operation of trusts.
LLCs: Limited Liability Companies, a business structure that combines the pass-through taxation of a partnership with the limited liability of a corporation.
Claims Against an Estate: Debts or obligations that creditors allege are owed by the deceased’s estate.
What is estate planning?
Estate planning is a crucial part of financial planning that goes beyond the mere allocation of assets. It’s a multidimensional process that secures the future of your dependents and loved ones after your departure. Estate planning involves making plans for the management and distribution of an individual’s estate both during their lifetime and after their passing. This process is designed to minimize various taxes, including gift tax, estate tax, generation-skipping transfer tax, and income tax. Furthermore, estate planning can involve wills, trusts, healthcare directives, power of attorney, and other aspects that protect your interests even when you’re incapacitated. In a way, estate planning is the best gift you can leave your loved ones to reduce their financial burden and provide security.
Asset Protection: Why Is It Crucial?
Concept of Asset Protection
Asset protection implements strategies to preserve an individual’s or a business’s wealth from creditor claims, lawsuits, and divorce. From a legal perspective, it is crucial to note that asset protection is not about defrauding creditors or evading taxes. It is a legitimate practice that intends to guard wealth against potential future disruptions. The idea behind asset protection is to take proactive steps to prevent problems from occuring, rather than resorting to retroactive solutions when legal issues arise.
Practices for asset protection can vary greatly depending on the assets involved, the individual’s risk profile, and the jurisdictions in question. Asset protection strategies can range from simple solutions, such as separating personal and business assets, to more complex ones involving the setting up of trusts, choosing what kind of insurance to procure, or even deciding on incorporating a company.
Asset Protection in Estate Planning
Novice estate planning often neglects proper asset protection, increasing the potential risk of legal issues that can erode an estate’s value before it even gets to the heirs. Asset protection ensures that wealth flows to the heirs and beneficiaries as per the wishes of the person, rather than being sieved out by opportunistic individuals or businesses in the form of legal claims.
Moreover, sound asset protection strategies will also maintain the privacy of an estate’s details. Certain protective structures can guard the details of the estate and its distribution from the public record, keeping the identity of the beneficiaries concealed from potential predators.
Risks of Not Implementing Asset Protection Strategy
Not incorporating asset protection strategies exposes an individual or a business to huge financial risks—a huge gamble where the odds are not in your favor.
Without asset protection, your assets are vulnerable to lawsuits, claims from creditors, divorce settlements, business disputes, and even unexpected tax liabilities. Any of these can rapidly dismantle accumulated wealth, leaving businesses in jeopardy and family members deprived of their rightful inheritance.
In worst-case scenarios, a lack of asset protection can lead to bankruptcy. Hence, asset protection forms a crucial part of financial planning.
We highly recommend Craig Associates, PC in Asheville. Chris Craig and his assistant, Shelly Lauzier, are exceptionally well-versed in North Carolina law, especially estate planning. They worked with Steve and me to create our living trust, amend our previous wills, and establish durable powers of attorney. We were complete novices, and Chris, always patient and kind, provided as much guidance and education as necessary to afford us a clear understanding of the North Carolina legal process to create a trust that would accommodate our desires and service our specific needs. Chris is trustworthy, intelligent, knowledgeable and well-read. He enjoys life, is affable, and can easily converse on a wide range of topics—a real Renaissance Man. His assistant, Shelly, is a stellar individual—outgoing, intelligent, dedicated to task, and has great interpersonal skills. We are so glad they are in our corner! We have already recommended Chris and Shelly to our friends who are interested in creating trusts. These two give 100% of themselves to every undertaking, and we would be remiss not to recommend them just as highly.
L B | Asheville, NC | Read more client reviews »
Exploring Asset Protection Strategies
Insurance Coverage for Asset Protection
Insurance is a fundamental tool in any asset protection strategy. It serves as a barrier between your assets and potential creditors. Liability insurance, property insurance, malpractice insurance, and life insurance are just a few examples of asset protection options. That said, insurance shouldn’t be the only measure you rely upon for asset protection.
Insurance also has its own limits; each policy comes with specific limitations and certain risks that aren’t covered by insurance. Also, once a claim exceeds the coverage limit, you will be liable for any remaining amount.
Creating Trusts for Asset Protection
Another powerful tool for asset protection is the creation of trusts. A trust is a legal entity that holds assets for the benefit of another. Trusts are highly customizable, making them very versatile in asset protection planning. This legal structure can shield assets from creditors because once assets are in a trust, they are no longer considered personal property. They belong to the trust, thereby insulating them from your personal financial liabilities.
There are several types of trusts, each specifically designed for different purposes. Revocable trusts, also known as living trusts, can be modified or revoked by the grantor during their lifetime. They offer great flexibility but provide limited asset protection. On the other hand, irrevocable trusts generally cannot be changed once established and offer greater asset protection but less flexibility.
Other types of trusts include dynasty trusts, charitable trusts, and special needs trusts. Dynasty trusts allow wealth to be passed down to successive generations without incurring estate or gift taxes. Charitable trusts are designed to hold assets that will eventually go to a charitable organization. Special needs trusts are designed to provide for disabled individuals without jeopardizing their eligibility for public benefits.
Tailored Investment Strategies for Asset Protection
Finally, tailored investment strategies can also form part of your asset protection plan. Wise investing can not only increase your wealth but also protect it when done correctly. However, this involves more than just selecting the right investments. It also includes strategizing on how to set up and hold your accounts in light of potential risks.
Key Elements in Asset Protection
Understanding Legal Structures in Asset Protection
There are different types of legal structures used for asset protection, including trusts, companies, and partnerships. Trusts are legal arrangements where one party (the trustor) transfers assets to another party (the trustee) for the benefit of a third party (the beneficiary).
Companies, on the other hand, provide a separation of personal assets from business assets. They can protect an individual’s personal assets from business creditors by limiting their claim to only business assets.
Partnerships, including limited partnerships and family limited partnerships, are a commonly used asset protection tool to protect against personal liability. These structures limit the liability of partners based on their input into the partnership.
Asset Protection: Identifying Exempt and Non-Exempt Assets
Exempt assets are shielded from creditors under state laws, while non-exempt assets are exposed to potential creditors. Common examples of exempt assets include primary residence, pension plans, life insurance policies, and certain personal properties. These laws vary by location, so it’s essential to understand the regulations applicable to your local residence.
Non-exempt assets, on the other hand, typically include bank accounts, investment accounts, rental properties, and non-primary residences. Restructuring non-exempt assets into exempt assets can help protect these funds from potential creditors. Therefore, it is crucial to distinguish between exempt and non-exempt assets when drawing up an effective asset protection plan.
Role of Financial Advisors and Attorneys in Asset Protection
Asset protection planning can be complicated; thus, financial advisors and estate planning attorneys play a pivotal role in explaining the process and guiding individuals in the right direction.
Financial advisors can help identify potential risks to your assets, suggest suitable asset protection strategies, and review your current financial plans to ensure that they adequately protect your assets. Attorneys offer legal advice on asset protection laws and setting up the legal structures for asset protection. They help ensure that all methods employed are within the confines of the law.
My experience with Craig Associates, PC was very positive. I attended an informational seminar at their office in the Southside of Asheville which answered many questions in advance.
They helped me to create an estate plan, living will, and health care power of attorney (HC PoA) for my end of life planning. Along with the estate plan are detailed instructions on how to transfer all my property into my trust. This will simplify the disbursement of my property when I am gone and should prevent probate. Chris will be available to my trustees to aid them in this.
My family is thrilled that I took the time to spell out my wishes for the end of my life in my living will to save them the anguish of making the decisions. We are all sleeping better at night.
Chris, Shelly and Justin were pleasant to work with and very efficient. I especially appreciate that they bent over backwards to meet my schedule as I had surgery planned and needed my HC PoA and Living Will in place before the surgery.
I would definitely recommend Craig Associates for your Estate Planning, Living Wills and Health Care Power of Attorney. Sleep peacefully!
Elaine S. | Asheville, NC | Read more client reviews »
Estate Planning & Asset Protection FAQs
1. How can an estate plan help in minimizing taxes?
Estate planning minimizes the potential tax burden during the transfer of wealth. For example, strategically utilizing gifts and trusts can reduce the estate’s size, lowering taxes.
2. What are some common tools used in estate planning for asset protection?
Trusts, wills, and power-of-attorney designations are common tools used in estate planning. Trusts, particularly, help protect assets by placing them under a legal entity’s control, to shield them from potential creditors.
3. How often should one review their estate plan?
You should review your estate plan and asset protection strategies at least every three to five years. However, significant life events, such as marriage, divorce, death, or the birth of a child, should also prompt a review.
Learn More About Estate Planning & Asset Protection
Our estate planning professionals would be happy to help you create a legally sound estate plan with the appropriate asset protection strategies in place. Call Craig Associates, PC at (828) 258-2888, or contact us using the form below. We also invite you to attend a free estate planning seminar to get a head start on preserving your hard-earned wealth!
