Asset protection is a crucial element that should be a focal point of any well-rounded estate plan. While the main objective of your estate plan might be to ensure that your assets are passed down to loved ones, it is equally important to take steps to protect those assets during your lifetime. If you fail to protect what you have worked hard to build, there could be little left to pass on by the time you reach the end of your life. Toward that end, the Los Angeles attorneys at Schomer Estate & Wealth Advisors discuss eight asset protection tips to consider in your estate plan.
Asset Protection Planning
The importance of asset protection cannot be overstated. Including these strategies in your estate plan can help secure your financial future. Because asset portfolio and estate planning goals are unique, it is essential to work with an experienced estate planning attorney to determine the best tools and strategies for your specific situation. In the meantime, the following are several commonly used asset protection tools:
- Creating an Estate Plan. A comprehensive estate plan serves as your first line of defense when it comes to protecting your assets. Without an estate plan in place, your assets are left vulnerable to various risks. A well-crafted estate plan can help you minimize those risks and ensure your assets are passed on according to your wishes.
- Minimizing Taxes. Federal estate and gift taxes, as well as state-level taxes, can significantly reduce the amount of wealth you are able to transfer to loved ones after your death. Tax avoidance planning is an essential aspect of protecting your estate. One effective method is lifetime gifting, which allows you to reduce the taxable value of your estate before you pass away, lowering the potential estate tax liability for your heirs.
- Planning for Long-Term Care. Long-term care (LTC) expenses can drain your assets if you are not prepared. Medicaid planning is a strategy designed to protect assets from being depleted by LTC costs. Since Medicaid is a needs-based program, you must meet strict asset and income limits to qualify. A common strategy is to establish a Medicaid trust, which shields non-exempt assets and ensures they are not counted when determining Medicaid eligibility.
- Utilizing Pre-Marital Agreements. In the event of a divorce or the death of a spouse, disputes over asset ownership can arise, particularly if there is no agreement in place. A pre-marital agreement clearly defines who owns what, reducing the likelihood of drawn-out legal battles. This agreement also helps ensure that your estate is distributed according to your wishes without being subject to marital or intestate succession laws.
- Establishing Trusts. Trusts are versatile tools that can protect assets in various ways. One common option is an irrevocable living trust, which transfers ownership of your assets to the trust, effectively removing them from your estate. This move can protect your wealth from creditors and lawsuits. Trusts can also protect assets from spendthrift beneficiaries by placing conditions on when and how they receive their inheritance.
- Business Succession Planning. If you own a business, you need a plan for how your interest will be handled after your death. Business succession planning ensures that your business will be passed down or sold according to your wishes. Additionally, this type of planning can shield your personal assets from business debts, reducing your personal liability.
- Proper Asset Titling. The way you title your assets can have significant consequences for both asset protection and estate planning. Jointly titled assets can be at risk if a co-owner has debt or legal troubles. Careful consideration of how to title your assets will help protect them from external risks and ensure they are passed on efficiently when you die.
- Regularly Updating Your Estate Plan. An estate plan is not something that should be created and forgotten. Life changes—such as marriage, divorce, the birth of a child, or the acquisition of new assets—can impact your estate plan. To keep your assets protected, it is important to review and update your plan regularly and make any necessary changes to address significant life events.
Do You Have Additional Questions about Asset Protection Tips?
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about asset protection tips that might work in your estate plan, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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