How do asset protection and estate planning go together? At a high level, they’re both focused on helping you pass on the assets you’ve worked so hard for. Let’s dive a bit more into what each means, and how they work together.
What is Asset Protection?
Asset protection is where you put safeguards in place to prevent a large percentage of your assets from being taken away. A lot of people can benefit from asset protection. However, some demographics tend to find themselves in situations requiring this protection more often than others.
For example, doctors will often get asset protection since they have a higher-than-normal likelihood of getting chased by creditors due to their high net worth. Lawyers, investors, and successful business owners are in the same boat.
But people in any career field can own a substantial amount of assets if they’ve worked hard, saved up, and invested well. That’s why most people can benefit from at least exploring asset protection.
Who, or what, are these safeguards protecting the assets from? It depends, but usually, it’s protection against lawsuits. For example, let’s say you are a successful business owner and have done pretty well for yourself. What if you have a family friend spend the night and slip in the shower the next morning? Even though they’re a friend, they know you’ve done well for yourself and may be tempted to sue you. If you have asset protections in place, it will be more difficult for them to take everything from you.
What is Estate Planning?
Estate planning is where you put together a plan to pass on everything in your estate. This usually means passing on these assets to your loved ones, but everyone chooses to have different beneficiaries. For example, some people choose to donate parts of their estate to their church, alma mater or charity.
Similar to asset protection, estate planning is something everyone can benefit from. It’s the best way to make sure everything you’ve worked hard for will be divided up the way you want it to be when you pass on.
For example, let’s say your alma mater made a big impact on your life. You believe if you hadn’t gone to that school and received that college degree, you wouldn’t be where you are today. In that case, you can go through the estate planning process to make sure some of your estate goes to that school instead of all going to your next of kin.
How do Asset Protection and Estate Planning Go Together?
Asset protection planning and estate planning often go well together. The asset protection side helps prevent you from losing assets so you can then pass them on through the estate planning side.
But keep in mind these don’t always work perfectly. For example, it’s popular as part of estate planning to give gifts to loved ones. On the asset protection side, you need to be careful with gifts because they can be seen as a fraudulent transfer if done incorrectly.
That’s why it pays to have attorneys involved. We can help you navigate the waters of both estate planning and asset protection.
Every client’s situation is different, so please give us a call at 714-663-8000. We would love to help you walk through your planning needs and offer any advice we can.