Every adult should have a comprehensive, customized estate plan in place. Yet, the AARP cites survey data showing that six in 10 Americans lack a will—let alone other estate planning documents. An estate plan can help you secure your legacy. One of the most important advantages of proactive estate planning is asset protection. At Estate Law Center USA, we are asset protection specialists. Here, our estate planning attorney explains the importance of proactive asset protection.
What is Asset Protection?
As broadly defined by Investopedia, asset protection is a term used to refer to the “strategies used to guard one’s wealth from taxation, seizure, or other losses.” It involves the structuring of your finances in a manner that best protects what you have earned. Depending on your specific situation, asset protection may include setting up trusts, holding assets in limited liability entities, or transferring ownership rights. The key: You need to be proactive. Asset protection is only truly effective when it starts before a claim/liability arises.
Three Reasons Why Asset Protection Matters
Asset protection is an essential strategy for safeguarding wealth. It is a defense mechanism that is designed to protect you, your family, and/or your business. Here are three reasons why you need a comprehensive asset protection strategy:
- You Worked Hard for Your Life Savings: Earning and saving money is a product of countless hours of dedication, sacrifice, and strategic decision-making. Your life savings represent all of the time and energy that you have put into building wealth. It should serve as a foundation for your current and future lifestyle. Asset protection helps to ensure that your life savings will be available for the desired purpose.
- You Want to Preserve Wealth and Provide Support: Beyond personal financial security, asset protection is about stewardship of your wealth. It enables you to preserve your financial legacy and provide support to your loved ones long after you are gone. By implementing strategies to protect your assets, you can help to ensure that your wealth serves a greater purpose. It can support family members, close loved ones, and even the causes that you care about the most.
- Your Assets Face a Number of Different Risks: You need to protect your assets because they face material risks. Funds kept in bank accounts are not especially secure if claims or liabilities arise. Even assets that may feel more protected—such as real estate—may be far more exposed from a legal and financial perspective than you realize. Asset protection is about creating a robust defense that preserves your wealth against a wide range of threats.
Know the Risks to Your Assets
Asset protection is not merely a financial strategy. It is much better to think of it as a broader form of risk management that is designed to preserve your wealth for its intended purposes. The risks facing your assets are complex. Here are four significant financial risks to which your assets could be exposed if you do not have a proper plan in place:
- Creditor Claims: One of the most direct threats to your assets is creditor claims—including lawsuits. People and businesses alike can find themselves on the receiving end of a claim for a wide variety of reasons—from consumer debt to professional liability to alleged negligence. Without a protective barrier, your assets are vulnerable to these claims. These claims could be far more costly than you initially realize.
- Long-Term Care Costs: According to data from U.S. Health News, the average monthly cost of a private room in a nursing home is $9,034. In some areas, the cost runs over $15,000 per month. That is more than $100,000 per year. An extended period of long-term care needs could drain your life savings. Medicare does not cover these costs. You will need to spend down your own assets before government support—in the form of Medicaid—steps up to cover long-term cases. Asset protection can help to protect your life savings against the immense risk posed by long-term care costs.
- Fraud and Theft: In an era where digital transactions are commonplace, the risk of fraud has never been higher. Cybercriminals can empty bank accounts, steal identities, and more, often before the victim is even aware of the breach. Physical theft and embezzlement are also risks, particularly for those with tangible assets of considerable value. Protecting your assets from such threats requires both vigilance and strategic planning.
- Estate Taxes: Asset protection is also about taxes. Tax planning is especially important for higher net worth individuals. The federal estate tax exemption is currently scheduled to be cut in half in the coming years. Further, many states have state-level estate tax laws in place. You need to be properly prepared for estate taxes and other potential tax obligations. The proper strategy could help to reduce your overall burden.
An Asset Protection Strategy Should Be Customized to Meet Your Needs
What is the best estate planning strategy to protect your assets? The answer depends on a number of different factors, including what exactly you are trying to protect. An asset protection strategy should always be customized to meet your needs. An experienced asset protection attorney can:
- Review your finances and your goals;
- Answer your questions and explain your options; and
- Develop a plan to best preserve wealth and protect your assets.
There are a number of different asset protection strategies available—from early gifting to LLCs for a business to irrevocable trusts. A proactive approach can make the difference between preserving your wealth and being exposed to serious financial risks. Do not wait to get started.
Schedule a Confidential Consultation With a Top Estate Planning Lawyer
At Estate Law Center USA, we are asset protection specialists. If you have any questions about asset protection, we are here as a legal resource. Contact us today to set up your confidential initial consultation. Our firm has free estate planning workshops upcoming in Alpharetta, Georgia. Let us help you get started with asset protection.
