If you have children, include asset protection planning for your children in your own estate planning.  By planning carefully, you can provide asset protection for your child’s inheritance (or a gift you give during your lifetime.)

Your Revocable Living Trust

In your own revocable living trust, you can make provisions for sub-trusts for your children (or other beneficiaries.)  Outright gifts provide no asset protection and are like throwing your money into a wind tunnel for anyone to grab.  Gifts in trust provide protection so that only your child can grab his or her trust assets.  Your child’s creditors are helpless.

Your Child’s Trust

Your child’s trust will contain specially drafted provisions that authorize distributions to or for the benefit of your child only, not his or her creditors.  For example, monies may be distributed for your child’s health, education, and maintenance.  The trust will specifically state that trust assets cannot be used to pay your child’s creditors.

Trustees of Your Child’s Trust

To obtain the highest level of asset protection, your child should not serve as the sole trustee of his or her own trust.  However, your child may serve as co-trustee with the trustee of his or her choice such as any other adult, or corporate fiduciary (bank or trust company.)

Protection from Creditors Examples

• If your daughter is a medical professional and is sued for malpractice, her personal assets could be taken, but her trust assets cannot be taken thanks to your good planning.
• If your son has a business failure or medical crisis and goes bankrupt, his personal assets can be taken, but his trust assets cannot be taken thanks to your good asset protection planning.
• If your daughter is momentarily distracted by the grandkids and slams into a school bus full of cute elementary school kids, her personal assets can be taken, but her trust assets cannot be taken thanks to your good asset protection planning.
• If your son gets divorced, his assets can be taken in a property distribution, but his trust assets cannot be taken thanks to your good planning.

If you have questions about asset protection planning for your children, consult with a qualified estate planning attorney.

Ryan, Hicks, Cumpton & Cumpton LLP is a member of the American Academy of Estate Planning Attorneys.

Asset protection planning is typically utilized to safeguard assets that would otherwise be at risk, or to provide extra protection in the event that insurance thought to provide adequate coverage does not. For the most part, the more thorough and complex the asset protection plan, the better the protection, but this is not always the case, as extremely sophisticated plans typically carry more restrictions and cost more.

The basics of asset protection planning involve rearranging the ownership of assets to make them out of reach of potential creditors as a means for preparing for the possibility of future lawsuits. In many ways, asset protection planning can act as a type of supplementary insurance. For example, the amount of a claim may be over the insurance policy limits, or there may be some other loophole that nullifies existing coverage.

The simplest type of asset protection planning involves looking at which property you have is exempt and therefore unreachable by creditors. For example, usually furniture, clothing, jewelry and tools of a business or trade are exempt.

In some states a home or land can be considered exempt. Transferring the ownership of assets to a spouse or family member can sometimes be the simplest type of asset protection planning, protecting property during your lifetime and from the tax collector at death.

Good professional advice can stave off big problems down the road. Contact us for reliable asset protection planning and know that your hard earned assets are safeguarded from potential creditors. Use our contact form or call us directly at (251) 342-8188. A knowledgeable asset protection lawyer can provide peace of mind and a solid plan that will protect your interests for years to come.

Ryan, Hicks, Cumpton & Cumpton LLP is a member of the American Academy of Estate Planning Attorneys.