Protecting Your Assets from Divorce, Taxes and Creditors

Jul 28, 2010  /  By: Michael Bonfrisco, Estate Planning Attorney  /  Category: Asset Protection

Asset protection planning is a method of preparing for the possibility of future lawsuits by rearranging your assets so that they are beyond the reach of potential creditors or divorcing spouses.

To do this, you’ll need to convert your non-exempt property into exempt property – property that cannot be seized in a lawsuit. Exempt property can include:

  • Household furniture and furnishings
  • Clothing and jewelry
  • Tools of a trade
  • Social security benefits and life insurance policies
  • Funds held in retirement accounts, pension funds

If your assets are primarily monetary, you could of course invest in non-exempt property to create the transfer, but there are other ways to accomplish your goal.

One of the easiest ways to convert property is to transfer the assets to an irrevocable trust with a spendthrift clause. This type of trust severely restricts your access to the assets, so there is a downside, but it also protects your assets from most lawsuits and seizures.

Another way of protecting your property is to gift it to family members. This transfer of ownership can protect the assets from creditors because you no longer own them so they are not considered part of your estate. Just keep in mind that gifting also means you lose control over the asset and any income generated from it. Also, the transfer may protect the concerned assets from your creditors but make them vulnerable to claims from creditors of the new owner and depending on the value of the asset, could result in a gift tax imposition on you.

Of course, these are just a few ways to protect your assets from creditors and lawsuits. To learn more about asset protection, you should consult a qualified estate planning attorney.

The Bonfrisco Law Firm is a member of the American Academy of Estate Planning Attorneys.

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How to Protect Your Assets

Jun 25, 2010  /  By: Michael Bonfrisco, Estate Planning Attorney  /  Category: Asset Protection, Estate Planning

Asset protection is a process that protects protecting your assets from third-party claims such as from creditors and lawsuits. It typically involves taking account of the assets you have, setting out your future goals, and then placing assets in a position to help achieve these goals.

Asset protection can also include planning ahead for different scenarios. For example, if you’re incapacitated or die, nominating your beneficiaries and who’ll manage and distribute your assets beforehand is vital. This might involve naming or transferring assets into a will, trust or company. Many individuals also use asset protection strategies to avoid the probate process. Trusts can often be the preferred option, as probate can be long, drawn out and expensive. One of the most common reasons for wanting to avoid probate is because your intended beneficiaries might not end up with assets as per your wishes.

Asset protection in estate planning is a legal process. If plans aren’t carried out according to legal stipulations, assets can become unprotected. Individuals also need to get it right; otherwise, assets could be liable to fraud and mismanagement.

The Bonfrisco Law Firm is a member of the American Academy of Estate Planning Attorneys.

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