The basic idea behind asset protection planning is the preservation of your life’s savings, to ensure that the wealth you have accumulated will be available to pass on to those to whom you wish to leave it.
What individuals may not realize is that many common situations can carry the risk of substantial loss to you and your family in a very short period of time. Asset protection is critical in helping avoid these situations or in minimizing losses.
Such situations can include: remarriage of your spouse after your death; financial abuse of your surviving spouse by a loved one or a care provider; long term care expenses; a spendthrift child or grandchild; death taxes, an in-law who wastefully consumes inheritance; liability of heirs for lawsuits; and bankruptcy or business failures.
One thing to keep in mind before you proceed with any planning techniques is that asset protection planning cannot be used to defraud existing creditors. This included situation where: you are currently planning to file for bankruptcy; you face pending or threatened litigation; you are aware of any other claims against you; you are planning to conceal your assets from known creditors
That said, properly structured asset protection planning can, among other things, help you:
• Preserve government benefits for special needs children
• Protect your children’s inheritance from your spouse’s future marriage partners
•· Ensure that long-term care insurance is adequate for your needs
• Protect your assets in the event that long-term care becomes necessary
• Protect vets protects their assets in the event they don’t qualify for VA-run nursing home care
• Obtain VA-paid “aid and attendance” benefits
Special needs trusts, adequate long term insurance, and properly structured asset protection planning can help in these situations. And one thing to keep in mind is that, even if you have not yet set up an asset protection plan, it is never too late to save at least part of your wealth.
It is especially important for persons in professional practice, such as dentists, doctors, lawyers, and financial planners, to ensure that they have adequate liability insurance. And it is always wise to back that up with careful asset protection planning, in the event that liability insurance is inadequate to cover any liabilities.
Source: Southern Business Journal, “Reasons why you should do asset protection planning,” Richard Habiger, 2 Mar 2011.