Though making considerable strides over the past 10 years, asset protection planning is still often misunderstood or underestimated. Some practitioners question whether it really works, although that is due mostly to several prominent cases in which plans failed because they were poorly implemented and designed. Where once attorneys questioned the ethicality of asset protection planning, viewing it with suspicion, today some planners feel strongly that it is grounds for malpractice if one fails to advise a client about the asset protection planning options available. Nevertheless, asset protection planning is not right for everyone, nor is it universally available.
What Exactly Is Asset Protection Planning?
Under certain circumstances, your assets are at risk. Asset protection planning involves taking advance action to guard against these risks via a process of organizing one’s affairs. It can apply to a professional practice, an operating business, or any other type of asset.
Which Other Areas of Law Should Your Attorney Be Familiar With?
In the past, estate planning and asset protection planning were often performed in isolation from one another. However, the trend of integrated estate planning that unites the two disciplines is becoming more prevalent within the wealth planning community.
Due to the formerly separate nature of asset planning protection, the baseline knowledge and experience of an estate planning attorney may not be sufficient. You should find an attorney with specific knowledge about how fraudulent conveyance/transfer laws apply. Additionally, your attorney should have working knowledge of the following areas of law:
- Debtor/creditor law
- Bankruptcy law
- Business entities
Who Should Consider Asset Protection Planning?
Broadly speaking, there are three groups of people who may benefit from creating an asset protection trust:
- People with high net worth who are likely targets for creditors
- Couples who want an alternative to a prenuptial agreement
- Professionals who work in high-risk careers
Theoretically, you may still have the ability to benefit from the assets held in trust even while you remove them from your estate. An asset protection trust may reduce the amount of state income taxes imposed, or even eliminate the imposition altogether, depending on the circumstances.
Where Are Asset Protection Trusts Available?
The jurisdiction where you live also helps to determine whether you can benefit from the creation of an asset protection trust. As of now, there are only 14 states that permit them, including South Dakota, Alaska, Tennessee, Delaware, Utah, Hawaii, Virginia, Missouri, Wyoming, Rhode Island, Nevada, Oklahoma, New Hampshire, and Ohio.
Asset protection planning is most successful when involved with an integrated estate planning approach. Please contact a law office for more information.
Source: Estate Planning Lawyer King of Prussia, PA, Klenk Law