Running a business comes with its fair share of risks. Lawsuits and creditors can wipe out hard-earned assets—both personal and private, depending on your business structure—in one fell swoop. If you’re a business owner, asset protection and comprehensive estate planning is key.
Putting assets in a trust is one of the easiest ways to protect them. Assets that pass to beneficiaries through trusts are generally protected from a beneficiary's creditors, thanks to well-drafted trust agreements and proper trust administration. In many cases, the beneficiary can also serve as the trustee, maintaining control and benefit from the assets while keeping them beyond the reach of current or future creditors.
If you expect to inherit from your parents, consider talking to them about their estate plan. Find out whether these assets are held in trust. If not, suggest they consult with a qualified estate planning attorney. This proactive approach can go a long way in protecting these assets from creditors. It also helps protect your inherited assets if you divorce.
Under federal and many state laws, some assets are always beyond the reach of creditors. Examples include retirement accounts, life insurance proceeds and the cash value of life insurance policies. Work with a financial advisor to ensure your retirement plans are fully funded and protected, and that the cash value of your life insurance policies is growing. This helps create a reserve for the long term.
Asset protection trusts are designed to safeguard assets and avoid probate and estate taxes. These trusts are typically set up by individuals or business owners to ensure that their wealth is preserved and transferred according to their wishes, while minimizing the risk of loss.
There are several types of asset protection trusts, each with their own benefits and drawbacks. When you work with a skilled estate planning attorney, you can determine which type of trusts are right for your needs. For example, creating a revocable living trust or an irrevocable trust can help ensure a smooth transfer of business ownership upon the owner's passing, while others
Ultimately, business owners should work closely with legal and financial professionals to find the best asset protection and wealth transfer solutions possible. Reach out to James Bart Leonardi, LLC to learn more about your trust and estate planning options.