Protecting assets is a major focal point of estate planning. Taking better steps to protect your assets is the key to ensuring estate planning success over a long period of time. In this post, we will summarize four basic strategies to help you achieve better asset protection.
1. Joint Tenancy.
Holding property as Joint Tenants with Right of Survivorship (JTWROS) benefits married couples. Upon the death of one spouse, all assets flow to the surviving spouse without the need for probate. Holding property as JTWROS also has asset protection benefits because the property cannot be reached by creditors unless both husband and wife are liable. However, note that this protection exists only for as long as the marriage exists.
2. LLC or Corporation.
An LLC or corporation are the most widely used means of creating asset protection for owners. An LLC tends to provide more flexible tax planning and is easier to maintain, while offering similar asset protection as, a corporation. Either entity type is excellent for both running your business and protecting your assets. If your LLC has more than one member, a well-drafted Operating Agreement that addressed ownership transferability and that limits judgment creditors is worth its weight in gold.
3. Spousal Lifetime Access Trust (SLAT).
A SLAT is an excellent way to protect assets for your spouse and children. It is also a proven strategy to take advantage of the full amount of federal and state gift and estate tax exemptions (especially since the current federal exemption is $11.58M). The SLAT is an irrevocable trust designed to allow a grantor indirect access to his/her assets while fully protecting the assets for other family members.
4. Domestic Asset Protection Trust (DAPT).
Asset protection trusts are irrevocable self-settled trusts that, when drafted properly, allow the grantor to be a permitted beneficiary while still protecting the assets from creditors. DAPTs must be funded to be of benefit and depending on the asset type, the asset-transfer process is crucial to the level of protection afforded.
The above strategies may be of significant benefit to you, your family, and your business or other assets; however, the strategies may be complicated, and it is important to work with legal and financial advisors that understand the implications of drafting, funding, and timing.
Fournier Legal Services has been a customer-service oriented, technology-based, paperless law firm from the day we opened, and we are uniquely positioned to help our clients navigate the current environment. For any questions related to Business Law or Estate Planning, please contact us by calling 860.670.3535 or emailing firstname.lastname@example.org.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.