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How can estate planning protect your assets?

On Behalf of | Mar 10, 2021 | Estate Planning

The property you have invested in throughout your life probably has some emotional significance for you. If you are like most working adults, you probably also hope to leave those assets to someone that you care about when you die.

Unfortunately, many people underestimate the debts they will incur as they get older or the risk they take when they grow their professional practice or small business. Creditors and those who could bring a civil lawsuit against an individual or any businesses that they run could make claims against that person’s estate as well.

In other words, while companies may not force you to pay them while you are alive, they can demand payment before assets ever reach your loved ones. They could also sue you now and take property or place a lien against it. Even government insurance programs can come after your property when you die to seek repayment for any benefits they offered to you. Asset protection planning allows you to protect your property from claims by creditors and other people both now and after you die.

Estate planning and asset protection planning typically overlap

If you worry about losing your assets because of a business investment, protecting those assets can be a good reason to make a comprehensive estate plan. You can consider methods like changing how you hold your assets and whose names are on ownership paperwork. You might want to create a trust for major assets like your house.

Those who are already near retirement might even integrate a strategic gift plan that allows them to give assets annually to loved ones while minimizing tax risk. Your assets and needs are going to play a big role in determining the best asset protection plan for your situation, but you can probably create it while making or revisiting your estate plan.

For asset protection to work, you must do it before there is a real threat

The best time to do asset protection planning is well before you apply for state benefits, face aggressive collection activity or start a business. However, anyone concerned about creditor activity now or after they die may benefit from asset protection planning.

People will generally benefit from considering creditor claims and future potential lawsuits ahead of time. If you wait until someone has filed a lawsuit against you or secured a judgment, you will likely find that any attempts to protect your property won’t work.

Planning to protect your assets before a threat materializes, you will have the best protection available if someone does try to claim your property or diminish your legacy. Like other, more standard forms of estate planning, asset protection planning is best started well ahead of time.