You may be laser focused when it comes to the accumulation of resources, but you should be just as concerned about protecting your assets. In this post, we will look at asset protection from a few different angles.
Small Business Asset Protection
If you are the owner of a small business, you can be held personally liable for business related damages if you do not create an asset protection structure. One possibility is the limited liability company (LLC), which is a relatively simple but effective legal entity.
When you execute the proper paperwork to establish a limited liability company, generally speaking, your personal interests would be protected if your business is sued for some reason.
Conversely, if a legal action is initiated against you as an individual, the LLC and the property that it owns would be protected, but there are some exceptions to the rules.
You could potentially be held responsible if you are negligent while you are conducting business and you directly injure another party. With regard to the asset protection for the LLC, a court could potentially issue a charging order that would pierce the protective shield.
A limited liability company will protect assets from future claims. You cannot use an LLC to protect assets after you find out that you are about to be the target of a legal action.
The family limited partnership is another protective structure. If you establish this type of partnership, you would be the general partner, and you would bring in family members to act as limited partners.
To explain by way of example, let’s say that you put a rental property into the partnership, and someone is injured on your property. If they file a lawsuit, they would be suing the family limited partnership.
As a result, the personal property that is owned by each respective partner would be protected. You could actually establish multiple different partnerships to hold each property in your investment portfolio to provide multifaceted asset protection.
If a partner is sued, the property that is owned by the partnerships would be out of the reach of the litigants.
These partnerships are also used by people that will be exposed to the estate tax. They can use the annual gift tax exclusion to transfer assets to the partnership in a tax efficient manner.
Personal Asset Protection
It is possible to use a self-settled asset protection trust to protect your private assets from future legal actions. These trusts are not legal in Connecticut, but you could potentially establish one in a state like Delaware or Nevada that recognizes them.
Nursing Home Asset Protection
People typically equate asset protection to legal actions, but you should also consider nursing home asset protection. Medicare does not pay for custodial care, and over 30 percent of seniors will require nursing home care at some point in time.
Medicaid is the widely embraced solution, but you cannot qualify if you have more than $1600 in countable assets. You could convey assets into an irrevocable Medicaid trust to remove resources from your name with future Medicaid eligibility in mind.
Remarriage Asset Protection
If you are getting remarried as a person with resources, you may want to enter into a prenuptial agreement to protect your personal assets. You can also take steps to make sure that your children receive their full inheritances.
A qualified terminable interest property (QTIP) trust can provide a solution. If you establish this type of trust and you predecease your spouse, they would receive distributions of the trust’s earnings for the rest of their life. They could also use property that is owned by the trust.
Your children would be the beneficiaries of assets that remain in the trust after the death of your spouse, and your spouse would have no ability to change the terms.
Schedule a Consultation Today!
We are here to help if you would like to work with a Glastonbury, Connecticut estate planning lawyer to put a custom crafted plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 860-548-1000.
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