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Four Ways to Achieve Better Asset Protection

Protecting assets is a major focal point of estate planning. In this post, we will summarize four strategies to help you achieve better asset protection.  

  1. LLC or Corporation. LLCs and corporations are widely used means of creating asset protection for owners. As opposed to a corporation, LLCs are easier to set up and maintain, and tend to provide more flexible tax planning, while offering similar asset protection. However, either entity type is excellent for both running your business and protecting your assets. Regardless of whether you prefer an LLC or a corporation, a well-drafted Operating or Shareholder Agreement that addresses ownership transferability and that limits judgment creditors is essential.
  2. 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.  
  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 $12.7M, but slated to decrease substantially at the end of next year). 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. Other Irrevocable Trust Planning. In addition to SLATs and DAPTs, there are a variety of other irrevocable trust planning techniques that provide great value to your estate because they both (a) remove the asset value for purposes of estate taxes and (b) provide asset protection from creditors. For example, if you own and live in your home, you may want to consider a qualified personal residence trust. If you are charitably inclined, you may want to consider a charitable lead trust or a charitable annuity trust, either of which supports your favorite charity(ies) while providing significant financial benefit to you/your family.

The above strategies may benefit you, your family, and your business; however, the strategies may be complicated, so it is important to work with legal and financial advisors that understand the implications of drafting, funding, and timing.  

For any questions related to Business Law or Estate Planning, please contact us by calling 860.670.3535 or emailing info@jeflegal.com.

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