As you start your estate planning, it’s important to think about protecting your assets. Make sure any assets you leave behind are handled correctly. Consider following these asset protection strategies. Remember that an Estate planning attorney is the best resource you have to make sure your assets are protected.
1. Assign a Power of Attorney
A Power of Attorney is an especially important step your asset protection planning. Power of Attorney lets you choose someone to give all control of any legal or financial decisions if you are unable to. Reasons you may not be able to make decisions can be medical or because of absence. These decisions can negatively impact your asset protection plan if you do not assign a Power of Attorney. If you have not assigned a Power of Attorney, a court usually appoints a guardian for you. Guardians act on what the court decides is in your best interest and, therefore not necessarily what you believe is in your best interest.
2. Purchase Insurance
End of life care can be expensive. Therefore it is important to make sure you and your loved ones are covered. Long-term care insurance covers the costs of your essential care once you are unable to do so yourself. Services for daily life activities you can no longer perform, like bathing or dressing, can be expensive. Medical services for you at the end of life stage are especially expensive. Also, purchasing life insurance is another way to keep your assets protected. Because life insurance does not pull from your estate, you will have more assets protected.
3. Protect Assets From Creditors
Asset protection trusts are very important to protecting your assets as you plan your estate. Some types of trusts can better protect your assets from lawsuits and creditors. For example, irrevocable trusts are off limits to creditors because you give up control of the funds in that trust. Since those funds no longer belong to you, they cannot be claimed in a lawsuit or debt collection. You are unable to alter an Irrevocable trust. There are many trust options to keep creditors away from your money, and an estate planning attorney can guide you on the best decision for your needs.
4. Keep Your Assets From Being Taxed
You can reduce the value of your assets significantly without planning for taxes. In 2013 assets in estates were taxed an average of 17%. You can protect your assets from probate and reduce the taxes charged to your estate. Just like there are many trust options to protect you from creditors, there are many that keep your assets tax-free. For example, a Bypass Trust is a great option if you are married. Use your will to allocate as much of your assets into a Bypass Trust up to the estate-tax exemption. Your spouse is also given an estate-tax exemption so you can double the amount of your estate that cannot be taxed. If you have an heir who is special needs or a minor, a trust is a great way to ensure their inheritance is protected. If you are leaving a large amount of money to your grandchildren, there is a trust for that. Generation-skipping trusts allow you an unlimited amount of inheritance, tax-free of course.
5. Protect Your Business Assets
When you own your own business, a Limited Liability Company is the most secure business type for your assets. Owning an LLC allows you to choose what tax election you want for your business. LLC ownership also means that your company will be taxed at the personal level and not at a corporate level. Most importantly, owning an LLC will shield you from personal liability related to your company. Any problems associated with your company will not make an impact on your personal estate.
6. Gift Assets
The best way you can give money to your family without being taxed is through gifting. You can gift around $11,000 per person without exceeding the tax gifting exclusion. If you are married, you can double that gift to $22,000. If you gift more assets you can keep your estate taxes lower. For minors, you can gift into trust accounts that will be paid to them when they reach 18. If you want to make a bigger contribution to something like college, you can use a 529 plan. A 529 plan allows you to deposit $250,000 without taxes. Your child or grandchild can also pull from the plan without pay taxes.
7. Plan Early
The most common mistake you can make in estate and asset planning is waiting too long. You should always be prepared to have the future of your money, estate, and business is taken care of. If a lawsuit is filed against you or your business, it is too late to protect your assets. If you pass away without making a plan your family can be left with financial and stressful burdens.