Asset protection, as we like to point out from time to time on this blog, is an important aspect of estate planning. Those familiar with the term know that it refers to the process of ensuring that one’s wealth is maximally, or at least adequately, protected from potential liabilities. Without engaging in at least some asset protection planning, one’s best estate planning efforts could be sabotaged.
One thing one can do to protect oneself from creditors is to increase one’s liability insurance. This is especially important for attorneys, physicians and other professionals who are routinely subjected to legal claims as a result of their profession. The amount of insurance one should take out will depend, and it is best to work with a financial planner on that.
For those in business, it is important to consider the liabilities inherent in business partnerships, since business partners are legally responsible for each other’s actions. Formalizing a partnership into a business entity with liability protection is an important way to protect one’s interests. Those in business can benefit from creating business entities designed to shield their personal assets from liability.
For spouses, it may be wise in some cases to keep assets separately, particularly in cases where there are children from a previous marriage. Putting assets in jointly held accounts can be risky not only for some spouses, but for business partners, roommates, and others, so it is worth considering whether this is the best arrangement in one’s own case.
While there are various techniques and tools specific to estate planning that facilitate asset protection, these should not be seen as separate from asset protection in general. Anything one can do to decrease one’s liabilities in one area will benefit one’s estate planning, because there will be fewer potential creditors when it comes time to divide up one’s estate.
Source: Forbes, “6 Asset Protection Strategies To Shield Your Wealth,” Robert Pagliarini, October 9, 2013.