Estate planning can be a very simple or a relatively complex process. Someone’s circumstances and personal goals influence how many different documents they require and how complex their estate plan could become.
Those with valuable property in their names often worry about protecting those resources both as they age and after they die. Asset protection planning can be an important aspect of modern estate planning. It can help people maximize their comfort as they age and minimize how much of their resources end up used to pay creditors or tax authorities. The sooner that someone engages in asset protection planning, the better their chances of optimizing their protection.
Identifying liabilities and assets
The first stage in asset protection planning involves determining what resources someone has to protect. They may need to go over their finances carefully to confirm what liabilities could potentially endanger those resources. Businesses, real property and financial accounts often top the list of the resources people want to protect. Taxes, student loans and medical debts are among the factors that people want to address with asset protection planning.
Shielding resources from creditors
After people have identified the assets that they hope to pass to the next generation and the financial obligations that put those resources at risk, they can start planning for the future. Shielding resources from creditors, tax authorities and anyone who might file a lawsuit can be a challenging process.
Oftentimes, it is necessary to change how someone holds their most valuable resources. In some cases, they add co-owners. The use of trusts is another popular option. Trusts are separate legal entities that can own assets and effectively shield them from legal and financial claims brought against an individual.
The type of trust someone has and when they face lawsuits or collection activity can influence how much protection a trust provides. The sooner someone engages in asset protection planning, the less they have to worry about outside parties laying claim to resources that they may depend on in their golden years or dream of passing to their loved ones.
Careful estate planning often involves a degree of asset protection planning. The preservation of key resources can amplify the positive impact that an estate has, in addition to preserving resources that someone may depend on in their golden years.