The following is a brief overview of Asset Protection Planning. If you have questions concerning this topic Payne, Black & Pickelsimer, LLC, would be happy to assist you in achieving your asset protection goals. We can guide you through this complex area of law.
What Is Asset Protection Planning?
Simply put, asset protection planning means implementing one or more legal techniques designed to organize an individual’s assets and business affairs in a manner which makes it difficult or impossible for certain the creditors to seize or obtain control of the protected assets.
There are literally hundreds of asset protection techniques. Some are little more than prudent rules to live by. Such as: (1) never enter into a general partnership with anyone, (2) never guarantee a debt you are not willing to pay, (3) never operate a business with employees as a sole proprietorship, (4) never allow an employee to handle your payroll taxes unless you implement steps to be assured they are being properly calculated and paid, etc. These techniques can be applied to anyone, while other techniques are more appropriate for wealthy or soon-to-be-wealthy people, such as foreign or domestic asset protection trusts. Further, the asset protection technique chosen may vary depending on type and location of the asset you are seeking to protect. But in the end, all asset protection techniques have one goal, to make it more difficult for a creditor to either find or take assets. By implementing a properly crafted asset protection plan a person can legitimately put a significant portion of his wealth out of the reach of many creditors, while retaining substantial control over those assets. Essentially, putting a solid asset protection plan in place forces legal opponents to quickly recognize the difficulty in pursuing a claim, and frequently aids in getting an opponent to drop or settle the suit.
Implementing plans to safeguard ones assets from business risks nothing new, however asset protection planning has become of increasing importance because of ever expanding theories of liability. New legal theories for law suits seem to spring up almost constantly. That coupled with the fear of runaway, results-oriented juries who appear to frequently ignore established law, has led to an ever-increasing concern among highly exposed groups like physicians and professionals. For this reason, asset protection planning is increasingly important.
Who should engage in Asset Protection Planning?
Traditionally physicians, other professionals, corporate officers, business and real estate owners who wish to practice their business or profession without jeopardizing the assets they have accumulated over the years, are the persons most interested in asset protection planning. However, in recent years the escalating cost of health care and long term care has garnered the attention of the middle class. More and more bankruptcy cases are filed every year as a result of medical bills and nursing home bills. Families have come to realize their life savings, their homes, their family farms and most of what they have worked there entire life to achieve is at extreme risk if a family member has no insurance, or the cost is not insured. Structuring ones assets to protect them from these types of costs is of increasing importance. This may involve multi-generational asset protection planning, such as parents leaving assets in a long term trust for the benefit of their children and descendants.
Another reason for the increased interest in asset protection planning is the rise in second and late in life marriages. While prenuptial agreements can generally protect participants in a second marriage or late in life marriage from loss of assets to divorce; most states make a person responsible for the health care costs of his spouse. Consequently a person who marries someone, who subsequently ends up in a nursing home can be held responsible for the cost of that persons care. Asset protection planning can alleviate many of these concerns.
Finally, as we stated earlier, many people engage in asset protection planning, because they fear hospital bills or nursing home bills will leave them or their family destitute. We cover this are in more detail in the Elder Law and Medicaid sections of this site. Just click on the topic.
A WORD OF EXTREME CAUTION!
Setting up an effective, LEGAL asset protection plan is a complex task. The plan not only needs to be properly designed and implemented, it must not run afoul of creditor protection laws. It is extremely important to understand that asset protection planning must generally be implemented in advance of incurring a debt, or even becoming aware a debt will be incurred in the future. While laws differ from state to state, and while Medicaid has its own penalty rules for moving assets, every state has fraudulent transfer laws designed to protect general creditors. Anyone contemplating asset protection planning must be extremely careful to remain within those laws in order to avoid the negative implications that may follow if one runs afoul of the applicable fraudulent transfer laws. Further, there is a very sharp dividing line between “legal” asset protection planning, and actions designed to defraud creditors. Defrauding creditors is criminal. For that reason it is essential to have an attorney guide you through the process.
IF YOU ARE INTERESTED IN DISCUSSING ASSET PROTECTION PLANNING, WE CAN ASSIST YOU IN WORKING YOUR WAY THROUGH THE APPLICABLE LAWS AND ACHIEVING YOUR GOALS.
The foregoing information is subject to change at any time, and other more complex rules may apply. Do not rely on this information as you may not fully understand all aspects of this topic. If you need help in this area seek the assistance of an attorney with experience in Asset Protection Planning. This site is not intended as legal advice.