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When I am discussing estate planning with people, asset protection always seems to come up. In fact if you are talk with your attorney about your estate plan, asset protection planning should always come up in your discussions. This is whether or not asset protection is one of your issues or goals in your estate plan. With that in mind, let’s talk a little bit about asset protection.
First of all what is asset protection anyway?
Asset protection is planning designed to shield your assets from the claims of creditors. Your may be thinking, but I don’t have any creditors. That is the best time to do asset protection planning, when you have no creditors breathing down your neck! Also creditors take many forms and arise in many different ways and from many different situations. The creditor most people think of is the one who arises from an involvement in an auto accident with you and the accident is your fault. You may say but I have insurance. The problem is that the damages you caused could be valued at more than your insurance coverage. There are many other possible creditors looming in your future from an ex-spouse (divorce) to the government, and every creditor in between. What effective asset protection planning will do is make the creditors’ access to your assets more difficult to accomplish!
The goal of asset protection is not to make you “bulletproof” from creditor attack. But rather to make it much more difficult and expensive for the potential creditor to gain control of your assets. In other words, if a creditor (an example being a person who was involved in an auto accident with you), obtains a judgment against you, and attempts to take control of your assets to pay off his claim against you, effective asset protection is designed to put you and the creditor on a more equal footing and to either stop the creditor in his tracks or to at a minimum allow for negotiations to settle the amount owed at a lower level. If the creditor and his attorney know that it may take months or even years, to collect their claim and that the costs to the creditor will be substantial, the creditor may settle for a lower amount or the amount of the insurance alone, in satisfaction of the claim.
The best way to think about this situation is to try and think of your assets as treasure you wish to protect. What might you do with your treasure? You might but it into a chest for safe keeping. Then you might put as lock on the chest. Then you might put the chest into a vault. Then you might build a castle around your vault. Then you might put a moat around the castle. Hopefully this will give you a great picture in your mind as to what asset protection planning is. All we are doing is adding additional barriers and protections to protect your treasure (your assets). Each level is another obstacle which the creditor must find a way to get through to get to your treasure. By using proven, simple techniques and strategies you can create different levels of protection for your assets. It may still be possible for a very determined creditor with very “deep pockets” to get though all the obstacles you have placed in their path, but the odds of success for the creditor get longer with each new obstacle in front of them.
Hopefully this has given you some insight into asset protection that you did not realize before. One the first things that seems to be asked after this discussion is completed, is why I would be concerned with this? One of the tenants of estate planning is distributing your assets to your loved ones. This may be money, real estate, and personal property that are is important to you. Also, what if I told you that you could give these treasures to your loved ones and have them protected from your loved ones creditors and predators, including the in-law that after your death becomes the outlaw. This can be done through the use of a lifetime protective trust for your loved. This is something you should definitely should talk to you estate planning attorney about!
If any of the above has hit a cord of interest with you, you should be talking with an attorney who concentrates in the area of estate planning about asset protection and all your estate planning needs. By taking the time to plan you can protect your property and your loved ones. If you would like more information about estate planning or asset protection, please contact our office or go to our website at www.fmcclurelaw.com.