With so much going on in the world these days, you want to take the time to make sure that your finances and personal papers are in order, and that your family will remain healthy and safe. It is difficult to anticipate what could happen, but it’s always best to be prepared. This is precisely why it is highly recommended that you plan out your estate, and protect your assets as soon as you can. This legal process tends to seem overwhelming and cumbersome for many, but it is definitely worth all the time and effort. Read on for more information to help you understand exactly what asset protection is and how it can be beneficial for you and your loved ones.
What Is Asset Protection?
We should start out with the basic question you probably have about asset protection, basically, it can be used in reference to a variety of financial arrangements you’ve undertaken in order to keep your property and money safe from judgments, divorce, and creditors. Loosely defined, it entails all of the protections you have legally set upon your assets to protect them against nearly all circumstances, including in the event of your death, and ensure that your close relatives have access to their inheritance justly and fairly.
Different Kinds of Plans
Asset protection plans are not one size fits all, and come in a variety of forms depending on your circumstances. According to the Atlanta-based experts at www.atlantaestatelawcenter.com, one of the more common arrangements consists of trust agreements wherein you would surrender some sort of control over an asset in exchange for protection from creditors. The surrender of control of the asset legally helps to protect you by keeping your liquidity and property safe and designated separate entities. So, you would still maintain ownership or have a stake in the asset in the eyes of the law, but the ultimate power is granted to someone else in order to keep things separate in case you run into any issues.
International and Domestic Trusts
Your asset protection plan can entail taking on a number of trusts for both domestic and offshore assets if this is the financial reality for you. An attorney can help walk you through the process, but basically, what form you choose depends on the state you live in and whether it is permissible to retain offshore accounts. For example, your lawyer may ask you to consider taking on a bridge trust, which takes effect on the occurrence of a specific event. In this arrangement, you will remain the trustee in full control of the assets until this event occurs. When it does, the trust is then automatically set and the foreign trustee will then be able to take control of your assets, even as you maintain ownership. You can also choose whenever you would like for the trust to dissolve so that you can regain control of your asset. This is an especially effective agreement to consider when dealing with different, smaller offshore LLC that can act as entities related to asset protection.
That being said, not all states recognize bridge trusts, so your lawyer should be able to tell you right off the bat if this plan works for you or not.
Assets and Taxes
Most people make an erroneous assumption that having their assets enter a protection plan exempts them from paying taxes. This is definitely not the case, and asset protection plans are still subject to tax laws, both local and federal. While the trust is meant to protect your assets, they are not designed to evade the IRS. In fact, some judges may request that you repatriate your offshore assets by court order, and a jail sentence is floated when these requests are ignored or flouted. Therefore, you need to be very careful about your assets, how you deal with your taxes, and being completely transparent with your legal team upfront about your needs.
The final and perhaps most important tip to leave here is that you need to start your asset planning early in the game. Don’t wait for a claim to come your way to begin the process. In fact, if you do wait till a claim or legal junction comes against you to start the process of asset planning, you may be accused of fraud and make things even worse for you.
If you are armed with the right knowledge, and a good lawyer to help, you will be able to avoid the many common pitfalls of not being properly organized when it comes to your assets. Plan early, understand your needs, and always remain compliant with the local law. Asset planning, when done properly, can be a boon to your interests and protect you and your family in the event of an emergency.