Acting with the future in mind can be the key to financial success, which is why it is important to develop an ongoing working relationship with a northern Kentucky estate planning lawyer early on during your working career.

By taking action in advance you can circumvent potential difficulties before they happen, and with this in mind, you may want to be proactive about protecting your assets.

When you have sufficient wealth, you may want to position it so it cannot be attached by creditors or claimants. You may also want to implement tax-saving strategies as you are looking forward to the eventual distribution of your assets among your loved ones after you pass away.

Some financial planning instruments utilized within the estate planning community that can keep your assets out of harm’s way. These would include limited liability companies, family limited partnerships, family savings trusts, and others. The best instrument or combination of instruments will vary on a case-by-case basis.

The key to an impeccably constructed estate plan is careful preparation with the benefit of professional advice. When you discuss the future with an experienced estate planning lawyer, he or she will first examine the nature and extent of your resources while gaining an understanding of your objectives and the dynamic of your family.

Your lawyer will then provide you with the optimal solutions given your unique situation, protecting your assets while arranging for a smooth and efficient transfer to your heirs after your passing.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

When creating your estate plan, you may consider asset protection planning.  You can maintain control over how your assets are used after your death. In addition, asset protection planning best ensures that your loved ones are able to hold on to these assets, even during difficult times.

What can asset protection do?

Asset protection can allow you to keep the assets you pass to your loved ones safe.  With asset protection, you won’t have to worry about losing important assets during life’s many challenges.

Asset protection can be used to protect your assets during your lifetime as well as after your death, when they’re distributed to your loved ones.

• Lifetime asset protection for yourself typically consists of good insurance planning and appropriate entity formation for business ventures.

• Asset protection for your loved ones typically consists of the creation of asset protected trust shares.

Why should I protect the assets that I leave behind to my loved ones?

You never know when your loved ones may be involved in an unfortunate situation.  For example, divorce is becoming ever more common. If you’re leaving behind assets to your son or daughter, you likely want to make sure that these assets won’t be taken during the divorce process.

Bankruptcy and lawsuits are other common issues that may arise. During bankruptcy, all of your loved one’s assets may be taken.  Lawsuits may include malpractice claims, slip and falls, car accidents, business failure, medical crisis, and the like.

Where to Get Help

If you want to make sure that your assets go to the right people, you should discuss asset protection planning techniques.  If you have any questions, or if you’d like to include asset protection planning in your estate plan, consult with a qualified estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

We often have elderly clients and their adult children come into our office with the fear, “Will I lose everything to the nursing home?  Fortunately, there are often options to alleviate this fear and protect assets.

Ryan and his elderly father, John, age 71, come into the office for a Medicaid/nursing home consultation.  John is still living independently but is concerned about his future.  He doesn’t want to be a burden on Ryan and his sisters and he doesn’t want to spend any more of his assets on the nursing home than he has to.

Fortunately, there is a lot we can do for John because he is planning ahead.  The Medicaid look back period is five years.  This means that when (and if) John ever needs to apply for Medicaid benefits to pay for nursing home care, Medicaid will look back at his financial transaction over the previous five years.  If there have been financial transfers for less than full value (gifts), he will be disqualified from receiving Medicaid to pay for his nursing home costs for a period of time as determined by a governmental formula.

First and foremost, we will put a good estate plan in place for John.  He names Ryan and his daughters as trusted helpers: executor, trustee, and power of attorney agents.  Because Ryan is a CPA, he chooses Ryan to serve as the primary executor, trustee, and financial power of attorney agent.  Because his daughter, Michelle, is a medical doctor, he names her as his health care power of attorney.  All children serve as back up trusted helpers, or fiduciaries, if the primary fiduciary is unable or unwilling to serve when needed.

We set up an income only trust to protect John’s assets.  He gifts most of his assets into the trust which would provide him income to pay his bills and meet his needs.  This would protect his assets from the nursing home; John decides he wants the assets to pass to his 7 grandchildren at his death.

If you don’t want to save assets from nursing home expenses, be sure to consult with a qualified elder law – estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

No one wants to lose half of the value of their life insurance to the federal estate tax.  But that is exactly what can happen if you don’t plan carefully.  You’re in luck because the federal estate tax is often a voluntary tax.  You volunteer to pay by not planning.  We suggest that you plan and avoid the federal estate tax.

• Unified Credit – Each individual can pass a certain amount during his lifetime or at death without paying federal estate tax.  This amount is called the unified credit.

• 2011 and 2012 – In these two years, the unified credit is $5,000,000 per individual.

• 2013 and beyond – Then, the unified credit returns to $1,000,000 and many families will be affected unless Congress takes action to protect families.

• Your Estate – The federal estate tax is a transfer tax on all the assets that you own at your death, including your real estate, retirement accounts, bank accounts, investment accounts, business interests, and life insurance.

• Tax Rate in 2011 and 2012 – 35% of every dollar over $5,000,000.

• Tax Rate in 2013 and beyond – More than 40% of every dollar over $1,000,000.

• The Solution – Because your estate includes everything you own at your death, you can protect the proceeds of life insurance by keeping the policy and the proceeds out of your estate.  You do this by having an Irrevocable Life Insurance Trust own the life insurance policy.

• How it Works in a Nut Shell

• Your estate planning attorney designs and drafts an irrevocable life insurance trust
• You execute the trust, and the trustee of the life insurance trust applies for life insurance on you and opens a checking account
• You make a gift to the trust by depositing money into the trust’s checking account; the trustee notifies trust beneficiaries of their right to withdraw the gift (known as Crummey notices), and uses the gift that is not withdrawn to pay life insurance premiums.
• When you die, the proceeds are out of your estate and pass in trusts to your beneficiaries.

If you have questions about how to protect life insurance proceeds from the federal estate tax, consult with a qualified estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

If you’re in a “high risk” profession such as medicine, law, or real estate, it is likely that you are concerned about protecting assets from lawsuits.  Asset protection is part of the estate planning process.  And, while we always recommend that you carry good insurance, there are other techniques that can be used to protect your assets if a judgment exceeds your insurance limits.

Here are some asset protection options for your consideration:

Trusts

By giving your assets during your lifetime or at your death in trust for your beneficiaries, as opposed to outright, you can give asset protection for your loved ones that you can’t get for yourself without putting your assets offshore.

Spousal Trusts

The high risk spouse transfers assets to an asset protection trust for her spouse.  The assets may then be protected from creditors of either spouse.

Offshore Planning

Offshore planning consists of physically removing assets from the United States and placing them in another jurisdiction that is not creditor friendly.  Offshore planning is expensive but a good investment in certain circumstances.

Family Limited Partnerships

Placing assets in a family limited partnership reduces your control of the assets and can make it more difficult for creditors to attach specific assets.

401k/403b Retirement Accounts

Assets in 401k and 403b retirement accounts (i.e. accounts at work) have a high level of asset protection, likely more than traditional or Roth IRAs.  To protect assets, fully fund your retirement plans, especially those at work.

Life Insurance

In many jurisdictions, life insurance cash values and proceeds payable to named beneficiaries (not your estate) are not subject to creditors of the estate.

Home

Your home may be protected under your state’s homestead provisions.  In addition, may states allow married couples to own a home as tenants by the entireties.  This protects the house from the creditors of one spouse.

If you have questions on how to protect assets from creditors, consult with a qualified estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

With asset protection planning, you are able to protect the assets that you give to your children during your lifetime and after your death.  Creditors can take your children’s personal assets, but with careful planning the assets that you give to them can be protected from divorce, lawsuits, and bankruptcy.

Divorce

Divorce is more common than most people think.  An in-law can quickly become an outlaw.  If you have given your child assets, these assets can be subject to a divorce property distribution.

This means that your child’s ex-spouse may get these assets.  If you protect these assets, they will remain untouchable.

Lawsuit

It is often impossible to insure against settlements and verdicts because they are so costly.

If your child is sued for causing a serious car accident or for being involved in a medical malpractice case, his or her insurance may not be able to cover the settlement or verdict.  In this situation, your child’s personal assets can be taken.

However, you can provide protection against creditors for assets you give your child.

Bankruptcy

Bankruptcy can be the result of a number of circumstances such as a business failure, job loss, and problems handling money.  If your child is involved in a bankruptcy proceeding, almost all of his or her assets can be taken.

Asset protection can keep these your assets in your child’s hands.

How to achieve asset protection

It is important to consider giving gifts that are protected, including giving gifts in trust.  A trust can limit the permitted uses for assets — for example, trust assets might be used for education, health care, and support for your child.  By doing this, you can limit creditors’ access to these assets.

If you have questions about how to protect gifts to your child with asset protection planning, consult with an experienced estate planning attorney.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.