The term asset protection is simple enough to understand, even without a legal or business background. Everyone can understand implementing your assets and why that is beneficial. However, most people would find it difficult to identify situations where asset protection really comes into play and have even more difficulty when asked to explain how you go about this protection. While asset protection is a broad term that encompasses a variety of techniques, here at Wild, Felice & Partners, PA, we use asset protection in both estate and business planning. Whether looking at asset protection from an estate or business-planning standpoint, two of the key benefits are control over the asset and protection from creditors. A further examination of both types reveals the numerous benefits that asset protection provides.
Estate planning is a prime opportunity for clients looking at implementing asset protection techniques. For years, people associated estate planning with having a will. While a will is a part of any proper estate plan & while a will does accomplish the goal of disposing of your property after death, it might not handle all of your desires. What if you want to give money to your son, but he is not responsible or has a great deal of debt? What if you want to make sure that money goes to your daughter and then your grandkids, not her new husband? Using a will to devise your estate property, but you will lose control of the property after the initial bequest. A trust based estate plan however will provide both control over the asset from beyond the grave and creditor protection for your beneficiaries.
Aside from the basic benefit of allowing you to avoid probate (which can cost up to 10% of the estate value), the use of trusts in estate planning provides significant asset protection. When your assets are in a trust, they cannot be reached by creditors, litigation, bankruptcy or divorce. While a will provides for a direct distribution of assets, a trust allows you to create a Separate Share Trust Fund for each of your beneficiaries that you are able to control and protect from beyond the grave for up to 360 years. The two most common trusts used in estate planning are revocable and irrevocable trusts. A revocable trust allows you to still use your assets during your lifetime, and may be able to limit your estate tax burden, while also allowing you to dictate ownership of property after your death. By using a revocable trust, you can control when beneficiaries will inherit the money, assuring that they do not receive the money at a point in their lives when they may not be responsible. Though the revocable trust will not protect you from creditors during your lifetime, a trust can protect beneficiaries from having creditors taking their inheritance. A final benefit that the revocable trust has is the ability to change the trust while you are alive, assuring that your assets will be protected regardless of what changes occur in your life.
As previously mentioned, an irrevocable trust is the other most commonly used trust form in estate planning. The irrevocable trust has many of the same benefits as the revocable trust: avoiding probate, tax advantages, control over distribution of the assets. Irrevocable trusts even provide stronger creditor protection during your life than a revocable trust. The asset protection with an irrevocable trust is immediate upon the trust formation, rather than having to wait until you die. The trade-off is that you have to give up ostensibly all control over the assets to the trustee. While the trustee has control of the assets, you will still be able to benefit from them during your life, and your beneficiaries will continue to benefit once you are gone. In exchange for giving up control over the assets, you will receive peace of mind, by knowing that the assets are secure and the distributions are properly timed. To maximize both asset protection and control, our lawyers will help you create the proper trust based plan that uses a mixture of both revocable and irrevocable trusts.
For more information on successful Florida personal asset protection techniques, please contact the South Florida law firm of Wild Felice & Partners, P.A. at 954-944-2855 to schedule your free consultation. It’s a Wild world. Are you protected?