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Asset protection planning: an important partner of estate planning, P.1

One of the primary goals of estate planning is to preserve your wealth so that you are able to pass as much on to your family, friends, or other beneficiaries as possible. Making sure that wealth is secure from liabilities is an important element in passing it on the way you want. For that reason, asset protection is an important consideration when it comes to estate planning.

As we mentioned in a recent blog post, the basic goal of asset protection planning is to insulate the assets you leave to your estate from creditor's claims. Trusts and well-planned gifting are two excellent tools for this purpose. Careful planning can also minimize estate and gift taxes. An experienced attorney will be able to make the most of these tools to ensure your assets are as secure as possible. A recent Forbes article discussed some principles to keep in mind concerning asset protection. We will dedicate several posts to exploring this issue.

It is important to remember starting out that tax and estate planning goals do not always fall completely in step with asset protection goals. Gifts to prospective heirs, for example, can be a fine estate planning strategy, but they are not necessarily a good idea from an asset protection standpoint, since they are vulnerable in fraudulent transfer actions. And some excellent asset protection actions, such as homestead exemptions, are not really advantageous from an estate planning perspective, since the value of the property remains confined to the debtor's estate. In other words, there has to be a balancing of competing goals when doing asset protection planning.

Another balancing act in asset protection planning is between giving the debtor a base level of control over his or her assets, yet not so much control that creditors can reach those assets on the theory that the asset protection scheme is, for all practical purposes, a way to simply shield assets from creditors.

In our next post, we'll continue exploring this topic.

Source: Forbes, "Ten Rules For Asset Protection Planning," Jay Adkinsson, 13 July 2011.

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