Individuals need asset protection for many reasons, one of the most common being to protect our family. Matthew Fassnacht, an investment advisor from Atlanta, Georgia, explains that we all have a significant amount of assets that could be breached, which could devastate our family’s stability. When an individual is sued, generally their liability coverage will not cover them if they lose the case because there was no insurance policy in place at the time of the incident.
What is Asset Protection?
Asset protection is a legal strategy to protect the assets of an individual or family from future liabilities, explains Matthew Fassnacht. Assets such as your home, savings and retirement accounts can be used for many purposes, such as education, purchasing items that will increase in value over time (i.e. real estate), starting a business, paying medical bills, etc.
Why do individuals need asset protection?
There are several reasons why individuals may need asset protection:
They want to make sure their children get the best possible education if something happens to them.
The government filed liens against them due to unpaid taxes
After the divorce, their spouse decides they want nothing to do with their property and files for bankruptcy on every property that is theirs alone.
They were sued for something they didn’t do or were only partially responsible for
The benefits of having an estate plan in place
According to Matthew Fassnacht, an estate plan is an essential part of asset protection. It ensures that your wishes are carried out after your death and can help avoid disputes between family members over who should inherit what.
An estate plan also allows you to appoint someone to manage your affairs if you become incapacitated. Without an estate plan in place, the state will decide who will take care of your children and how your assets will be distributed. It might not be what you would have chosen if you had the choice yourself.
Concrete examples of how to protect your assets
Matthew Fassnacht says there are many ways to protect your assets, and the approach you take will largely depend on your situation. Some common methods are:
Creation of a trust
A trust is a legal arrangement in which one party (the trustee) holds legal title to property for the benefit of another party (the beneficiary). The trustee can be an individual or a corporation, and the beneficiary can be anyone, including pets! One of the benefits of using a trust as part of your asset protection plan is to keep your assets out of probate. This means that they will not have to go through the legal system after their death and can be distributed according to your wishes without waiting months or even years. Another advantage is that trusts offer more privacy than they would – information about trusts is not in the public domain.
Create a corporation or LLC
A corporation is a separate legal entity distinct from its owners. This means that the owner (i.e. the shareholders) of the company is not personally liable for the debts and liabilities of the company. For this reason, corporations are popular among small business owners who want to protect their assets in the event their business fails. LLCs offer similar protection to corporations, but are much easier and less expensive to set up.
Subscription of life insurance policies
One way to ensure that your children will be financially taken care of if something happens to you is to take out life insurance policies naming them as beneficiaries. If they have young children, it is also important to consider purchasing life insurance policies that will protect them if they are disabled.
Probation is a legal process in which the property of a deceased person (the deceased) is to be distributed according to the wishes set out in their last will. One way to avoid probate altogether is to create a living trust during your lifetime through an attorney experienced in asset protection planning so that it becomes part of your estate plan. The best time for this would probably be while you’re still relatively young and healthy to make sure there’s plenty of time to get everything in order.
You can protect your assets from creditors by filing for bankruptcy protection under Chapter 13 of the Bankruptcy Code. In this process, you work with a trustee and pay off some or all of what you owe over time (usually three to five years). However, if you own most of the assets jointly with someone else, they may be able to take it if they file before you – so both parties should understand their rights when considering such an option.
Why You Should Get a Will, Living Trust and Power of Attorney
Having a will is a way to ensure that your wishes are followed after death and to avoid family disputes over who gets what. It guarantees that at least a portion of your assets will go to the people or organizations you choose rather than being distributed according to state law.
A living trust is similar to a will, but becomes effective while you are alive and can avoid probate altogether. It is important to have a lawyer draft this type of trust for you, as many specific requirements must be met for it to be valid.
A power of attorney allows you to appoint someone else to decide on your behalf if you become incapable. This is especially useful if you want someone other than your spouse or children to have authority over your finances and healthcare decisions.
Matthew Fassnacht believes that the purpose of asset protection is to protect your assets from creditors. It’s important to take action now so you don’t have to worry later about how your family will be cared for in the event of a tragedy, which could weigh them down as they grieve and recover. Remember to protect yourself with a personalized estate plan especially for you during this time when it can make a difference! We want you to sleep well, knowing that your loved ones are taken care of should anything happen.
This article does not necessarily reflect the views of the editors or management of EconoTimes