Many people are aware that they can create an estate plan, but they may not be aware that there is another option to protect their assets. Asset protection planning can help protect an individual’s assets from creditors, certain taxes and other claims.
Asset protection planning overview
Asset protection plans can be used by individuals of all income levels, although some people believe they are reserved only for the wealthy.
The goal of an asset protection plan is to separate an individual from his or her assets. It usually involves transferring an individual’s assets to a protected ownership structure, such as a family limited partnership or an asset protection trust.
An asset protection plan may be useful for homeowners, individuals with a significant amount of credit card debt and individuals who work in professions with high liability or who may expect a lawsuit. They may also be used by business owners to protect against personal injury claims.
Asset protection trust
An asset protection trust shields assets from creditors and it is irrevocable. Once a person transfers assets into the trust, it is permanent and the assets are managed by a trustee.
This type of trust can help the individual avoid probate, which can be a lengthy process. The specific details of the trust are unique to the individual, however the trust will need to be created first and then he or she will need to fund the trust.
An experienced estate planning attorney can provide guidance about which type of plan may be the right fit.