The asset protection tools and strategies you use in your plan will be as unique as your overall plan is; however, some common asset protection strategies include: Gift and estate taxes– the key to avoiding (or diminishing) estate taxes is to decrease your taxable estate. One commonly used tool for accomplishing that goal is the annual exclusion. This tool allows you to make gifts valued at up to $15,000 ($30,000 if you gift-split with a spouse) to an unlimited number of beneficiaries each year tax-free. Gift made using the annual exclusion do not count toward your lifetime exemption. Divorce – this is [Read more…]
Care should always be taken when deciding how to hold title to property that is jointly owned. Each state determines what types of joint ownership are recognized and to what extent the owners are protected from claims against co-owners. Certain types of joint ownership protect each owner from claims or liens of the other owner(s). With other types of joint ownership, however, your interest in the property could be at risk because of a lien or claim filed against the co-owner(s). Make sure you understand what type of joint ownership to have and how that type of title does, or [Read more…]
You may have heard a lot about how a trust can be used to protect assets. It is true that a trust can protect the assets held by the trust; however, it must be the right type of trustand the trust agreement must be properly drafted. Trusts are broadly divided into testamentary and living trusts. Testamentary trusts do not activate until the death of the Settlor whereas a living trust activates when all elements of formation are complete. Living trust can be further sub-divided into revocable and irrevocable living trust. A revocable trust can be modified or revoked by the [Read more…]
Asset protection refers to the tools and strategies incorporated into an estate plan to prevent the various threats to your assets from causing you to lose some, or even all, of your assets. An asset protection attorneywill evaluate your estate plan and look for areas where your assets could be vulnerable and then suggest tools and/or strategies that will help protect those assets.
The key to preventing harm is knowing about the possibility of that harm so you can plan accordingly. As such, it is the threats you may not have thought about that could do the most harm. Have you considered, for instance how the divorce of a beneficiary could impact your assets? If your daughter and son-in-law decide to end their marriage, and you already gifted assets to your daughter, your son-in-law could end up with those assets in the divorce. The high cost of long-term care (LTC) is another huge threat to your assets, though you may not know it. Because Medicare [Read more…]
There are some common threats to your assets that you may have already thought about, and maybe even planned for in your estate plan. Among those are things such as your own divorce, which could result in the loss of assets because of the required division of marital assets. Economic downturn and failed business ventures are also things people typically recognize as possible threats to their assets along with the impact that federal and/or state gift and estate taxes could have on your estate assets. While these threats are fairly well-known, there are other ways in which your assets may [Read more…]
If you do not plan to pass down your business to the next generation, it is vital to consider what will happen to your business if something happens to you. One option is to enter into a Buy-Sell agreement. A Buy-Sell agreement guarantees that you (or your loved ones) will receive the fair market value of your interest in the business in the event you, or your surviving loved ones, must sell it at a later date. In essence, a Buy-Sell agreement is a binding agreement between you and someone who agrees to purchase your interest in the business in [Read more…]
There are numerous methods you might choose to facilitate the transfer of ownership of your business from one generation to the next. One of the more popular of those methods is to create a Family Limited Partnership (FLP). An FLP allows you to transfer your legal interest in the business to the next generation slowly, over time, while maintaining control over the day to day management of the operation until such time as you are ready to retire. In addition, you may be able to gain tax advantages by using an FLP to transfer interest in your business to future [Read more…]
There is no universal time frame within which a business should be passed down; however, if you plan to pass the business down to the next generation you must start the process far enough ahead of time for your business to make a successful transition. If, instead, you want the business to be sold upon your death or incapacity, you must also start planning now to ensure that your loved ones receive the fair market value of your interest in the business when the time comes to sell it.
Liquidity is important in any business; however, small to medium size businesses are notoriously short on liquid assets because the value of the business is often tied up in equipment, materials, stock, and other non-liquid assets. This is particularly true if the business is relatively young. Federal and state gift and estate taxes, however, are calculated based on the value of your estate, without regard to whether your estate assets are liquid or non-liquid assets. If your estate lacks sufficient liquid assetsto pay the tax due, assets must be sold to pay off the debt. Selling assets, however, could put [Read more…]