Chandler Asset Protection Lawyers
To manage and reduce risk, you can look to us for
trusts and other planning vehicles designed to protect your wealth from
unexpected financial threats.
Hoopes, Adams & Scharber’s asset protection and wealth
preservation planning services center on the creation of plans tailored to your
needs, goals and circumstances.
How Asset Protection Works
In general, asset protection means taking “non-exempt” assets (i.e., assets that
are subject to creditors’ claims) and repositioning them as “exempt” assets that
creditors cannot touch. Asset protection also includes positioning non-exempt
assets in vehicles that are difficult to “break into” and cause a creditor to
re-evaluate whether it is worth the time, expense and trouble of trying to
pursue those protected assets.
Asset Protection Tools
Asset protection planning generally incorporates tools that, when employed alone
or in concert, are structured to achieve your goals and protect family wealth
from the claims of creditors and predators. Those tools, which vary in their
applicability and complexity, may include:
the use of limited liability companies (LLCs) and limited partnerships;
gifting of assets either outright or into separate, irrevocable, trusts;
joint ownership of assets or, depending on the jurisdiction, holding assets as
“tenants by the entirety”;
transitioning non-exempt assets into exempt assets;
the use of life insurance and annuities;
the use of corporations, including professional corporations;
domestic asset protection trusts; and
dynasty trusts for the benefit of children and future generations.
Each of these tools is generally designed to protect different kinds of assets.
For example, LLCs and limited partnerships can be a great way to protect real
estate investments. If structured correctly, they can also be used to protect
certain liquid assets in addition to the real estate holdings. Under such a
strategy, brokerage and investment accounts may be combined with real estate
investments within one or more LLCs, making it much more difficult for a
creditor to reach those brokerage or investment accounts.
In many cases, the gifting of assets into separate, irrevocable trusts for
children and future generations is the easiest form of simple asset protection.
Depending on the amount of the gift, there may need to be a determination of
whether any gift tax issues arise from the gift. But once the assets are out of
your hands, they become unavailable to your creditors.
The downside of gifting assets, of course, is that you can no longer use or
benefit from the assets that you gave away. However, if you no longer need the
assets, gifting can be a great way not only to protect those assets from
creditors, but also to remove assets from your estate for estate tax purposes.
On the upside, gifting to an irrevocable trust protects the assets from your
future creditors and, if the trust is properly structured, from future creditors
of the trust’s beneficiaries.
Asset protection strategies can
benefit individuals in a wide variety of categories, such as:
business owners in high-risk
physicians, attorneys, accountants and other professionals vulnerable to
professional liability claims;
corporate directors and officers; and
high net worth persons and families who make inviting targets for predatory lawsuits.
While conventional estate planning is needed by
everyone, it does not provide asset protection. Living (revocable) trusts
provide comfort in easing the transition of your assets from one generation to
the next, reducing or avoiding estate taxes, and dealing appropriately with
blended families and remarriage after death issues. However, those trusts do not
protect assets from potential creditors or predators; assets held in a living
trust are just as subject to the claims of creditors as if the trust did not
exist at all.
To protect assets, you may need to build other types of trusts
and planning tools onto your initial living trust planning.
Timing is critical to asset protection planning: It must be done at a time when
there are no known creditor claims. The law surrounding “fraudulent conveyances”
prevents a person from engaging in asset protection planning if that planning
would otherwise hinder or delay the claims of known creditors. Such planning can
be set aside and subject you to a potential damage claim.
This area of law can be extremely complex, is full of pitfalls for the unwary,
and is also extremely fact-specific. This is one area where “one size”
definitely does not fit all. Also, there is no “quick fix” when it comes to
asset protection planning; it requires an in-depth analysis of your assets, your
potential liability risk factors, and your objectives. As a result, the earlier
one starts the process, the better; if an unforeseen liability arises, it is too
late to start planning.