By JEFFREY J. MCKENNA
By doing estate planning, you can often increase your asset protection. The key to effective asset protection is to structure your affairs in order to minimize exposure to potential lawsuits. If steps are taken to manipulate assets after a threatened claim, there can be problems with fraudulent conveyance laws. Fraudulent conveyances include anythingdone to hinder, defraud or delay a creditor. So, if you know a claim is on the horizon, you should not transfer or move assets in an effort to keep them from your potential creditors. If you do, that transfer can potentially be undone.
This article gives a few techniques that are important when emphasizing asset protection.
Insurance. It is crucial to review insurance coverage to be certain that it is adequate. Personal liability umbrellas are relatively inexpensive and are a must.
Business Entity. If you own rental property, investment real estate, or business assets you should strongly consider forming a business entity such as a corporation (either an S Corporation or C Corporation) or limited liability company. By forming a business entity, you can shield your personal assets from claims.
This is especially important if you have employees. Without a business entity to separate your business affairs and your personal assets, your personal assets would be subject to claims resulting from misdeeds of your employees.
Separation of Assets. An important form of asset protection and estate planning is the separation of assets between spouses.
Often, it is advisable for one spouse to own the business interests and the other spouse to own the assets which are less subject to potential creditors. If something does go wrong for the spouse involved in the business, the assets owned by the other spouse should be protected. Community property laws play a role in this arena, but spouses can disclaim a community property interest as necessary to help in asset protection.
Exempt Assets. An important form of asset protection is to own assets that are exempt from creditors’ claims. Significantly, personal residences, qualified retirement plans, life insurance and annuities can be exempt from creditor claims.
Conclusion. Because most individuals want to protect their assets, it is important to coordinate asset protection efforts with estate planning. By coordinating these efforts, the family’s assets will be better protected from creditors, and estate taxation of the assets can be minimized.
Jeffery J. McKenna is a local attorney serving clients in Nevada, Arizona and Utah. He is a shareholder at the law firm of Barney McKenna Olmstead & Pack, with offices in Mesquite and St. George. You can contact him at (702)346-1615 or email@example.com.