You’ve undoubtably worked very hard throughout your life. And, understandably, you likely want to protect your hard-earned assets for your retirement and, eventually, to pass them onto your heirs. However, to accomplish those goals, you need to plan proactively – you need to take steps to safeguard your estate from estate from unexpected taxes, legal issues, and potential disputes among family members. What are those steps, you may ask? Well, there are many ways to protect your assets, and some are likely better suited for your situation than are others. We’ll explore some of your options in more depth below, but first, let’s address the underlying question: What is Asset Protection?
Asset protection refers to strategies designed to shield your wealth from potential claims by creditors, lawsuits, or other financial setbacks. It involves legal and financial mechanisms that can help ensure that your assets, including real estate, investments, or personal property, are safeguarded for future generations. By adopting asset protection strategies now, you lay the groundwork for your heirs to inherit a legacy that isn’t plagued by unforeseen financial liabilities.
Above all, asset protection is about being proactive rather than reactive. Those clients who plan ahead are rewarded in that they are often able to safeguard their assets for their own retirement and for their heirs. Every client’s needs are different, but at Seward & Seward, we often utilize trusts, LLCs, and insurance policies, among other strategies, to protect your assets. These tools can help to limit the exposure of your assets to potential risks, ensuring that you and your heirs can preserve the financial security you have worked hard to build. By understanding the different options available to you, you can create a comprehensive plan that aligns with your personal circumstances and goals.
Who needs Asset Protection?
In short, everyone! It is important to understand that estate planning is not just for the wealthy; it’s an important step for anyone who wants to ensure their assets are passed on according to their wishes. Perhaps more importantly, creating an asset protection plan or an estate plan will give you peace of mind because you will know that you have provided a framework for your loved ones to follow after your death, which will be a very difficult time for your heirs.
What is involved in an Estate Plan or an Asset Protection Plan?
The WILL: While, again, every client has different goals and needs, all clients need a Will. This “basic” estate planning document is anything but basic. A Will allows you to dictate who inherits your assets, who will collect and manage your assets for distribution, who will serve as guardian for your children, who will serve as trustee for your children’s inheritances. A properly drafted Will clearly states your wishes, thus eliminating ambiguity which could otherwise lead to tension or fighting between family members.
The TRUST: Not all clients need a Trust, but many opt for them. There are two major categories of Trusts, which are outlined in detail in other of our articles on this website. Those two major categories are Revocable (you control your assets but those assets can still be subject to creditors) and Irrevocable (you give up control of your assets to shield them from creditors and to possibly quality for government benefits). Many people like Trusts because assets properly placed in them “avoid probate”. But I like Trusts because they offer clients flexibility in asset control and distribution, while allowing them to plan for incapacity. And, as mentioned, some trusts can protect your assets from tax liabilities and help qualify you for government benefits, such as Medicaid.
INSURANCE: Insurance can also be a powerful way to protect your asset from risk. There are various types of insurance policies, such as Life Insurance, Homeowners Insurance, Liability Insurance, Long-Term Care Insurance, and Disability Insurance. Some clients elect to use various insurances to protect their assets along with their Wills and Trust(s).
GIFTING: If you have a large estate and live in NY, you are likely aware of the NY Estate Tax Cliff. Simply put, if your estate is over the allowable New York State Tax Exemption, you will be taxed on the entirely of your estate (not just the portion that exceeds the exemption amount). Clients in this position often use strategic gifting strategies to reduce the size of their estates. The added benefit for such clients is that they get to watch those gift recipients enjoy those gifts while the client is still alive.
LLCs and CORPORATIONS: If you own your own business, you (hopefully) operate it through an LLC or a Corporation. If not, you should! Both LLCs and Corporations, if properly structured and managed, offer limited personal liability protection for their members/shareholders. Both structures also offer tax advantages for businesses. Separating your business assets from your personal assets through such a structure helps shield your personal assets from liability.
Protecting your assets DOES require careful planning to suit your unique needs. We work with clients to understand their portfolios, goals, family situation, and business structures to help devise a plan for each individual client. Are you ready to take steps to protect your future? Great. Give us a call or email us today to set up a free consultation. This article is just the tip of the iceberg – we can’t wait to help you navigate toward safeguarding your future.
Seward & Seward
516-766-1415
Catie@SewardsLaw.com
