This article is an attempt to set record straight and really dig right into what people mean when they say they want to protect their assets. It will break asset protection down into three different components and take a look at each one.
The first form of asset protection comes when somebody asks for help, age-wise they’re 65 or 75 and have seen some family and friends get sick, lose all their assets, and even maybe lose their home. So they don’t want that to happen to them.
In instances like this, it’s important to ask what are you trying to protect assets from because let goes a lot of different directions. So with this scenario, we need to take a good look at their health, their age, take a really good look at their assets and their monthly income, and Social Security pension.
Going back to the assets, we got to look at what they own. Do they own a home? Do they own other real estates? Do they have retirement accounts? Do they have other savings? Do they own other property or business interests in their name, we got to really take a good accurate picture of everything that they have.
And then we’ve got to look at all the rules that apply to all the different forms of assets and income and find out you know, really, what should they keep in their name, should they be forming some type of trust and transferring assets to a particular type of trust to get assets in their name? Oh, by the way, the typical traditional avoid probate revocable living trust does not provide any kind of protection of assets from a nursing home. That’s the stuff we’ve got to look at for purposes of protecting assets from a nursing home.
Ideally, you want to have all that protection in place at least five years before you step foot in a nursing home. So those are all factors that are that involve protecting your assets in case you get sick, and have to go to a nursing home. You need a medical asset protection lawyer in that case.
The second form of asset protection is a little bit different. So there are people looking for asset protection, and maybe they’re age-wise, maybe they’re in their 40s or 50s, or early 60s, or maybe they’re still working—and you know what something happened.
Maybe there’s this threat of a lawsuit against them. Maybe they were in an automobile accident, and the plaintiff’s lawyers are breathing down their neck saying not only are we going to take all of your insurance coverages, but we’re also going to come after you personally, maybe there was an accident on a piece of property that you own, somebody got hurt. Maybe you got sick or diagnosed with cancer, and so the medical expenses are going to be enormous, and you’re worried that you might get sued, there might be a judgment against you.
You’re going to have to use all of your personal assets to satisfy that judgment. Yes, many people have liability insurance, they have health insurance. But the concern that people have is that they’re threatening to sue me for $3 million dollars. And so if they’re successful, the insurance will pay the first million, but the person is going to be responsible for the next 2 million and that will eat up everything that I have. And that’s a justifiable expense.
The problem with that form of asset protection is twofold: one is in order to protect what you have from lawsuits, typically, you have to reposition some things that you own and into a form that maybe you’re not comfortable with. And maybe it’s a certain type of investment or legal form that you’re not comfortable with. Or maybe you don’t like the fact that you may have to give up some control over what you own.
The second component that really causes people to hesitate about protecting their assets from lawsuits is they typically don’t worry about it at all unless something happened. So when you take action after something has happened, even though a lawsuit hasn’t been filed against you yet, those actions may be able to be undone because the court said that it was some type of fraudulent conveyance or you did something with the intent to defraud a creditor. So often people start that kind of action too late.
The third form of asset protection is kind of a kind of lump of all the others, where someone wants to protect their estate from the government. For most people, this typically means something like wanting to protect their estate from taxes, and then that maybe that’s in the state tax discussion, maybe it’s an income and capital gains tax discussion, as you try to figure out the most efficient way to transfer what you have from you, perhaps to your spouse to the next generation, maybe even beyond that.
A lot of people want to keep the government keeps the judicial system, quite frankly, keep the attorneys out of that because it’s not an efficient process. It’s also expensive, and it’s time-consuming. So people want to protect their estate, make sure 100% of it stays in the family and the right family members are able to get things done at the appropriate time.
So all of those three different forms of quotes, asset protection, one protected from losing everything in case you get sick and go into a nursing home to protecting assets in case you get sued successfully. And you know, protecting the creditors from seizing everything that you own. And then three just generally people say they want to protect what they have from the government. And when we dig a little deeper, it’s taxing and a probate issue. So all of those require different discussions, different analyses, different solutions, different legal financial strategies.