Creating a nest egg large enough to provide financial security to future generations is a great accomplishment. However, determining how to protect these assets from creditors and other third parties (so loved ones actually receive the benefit of this hard work) takes advance planning and working with knowledgeable asset protection attorneys. Drafting a simple will, or merely putting money into a retirement or investment account, is unlikely to produce the desired results for a high-earning individual with a variety of assets. Instead, effective asset protection strategies for these individuals often involves executing a number of estate planning options, as well as conferring with family members on limiting their exposure, so preserving family wealth can be approached from multiple angles to maximize opportunities. Below is a discussion to get the estate planning and asset protection process started, as well as some commonly used tactics to protect assets against claims that could deprive family members from enjoying their inheritance.
Starting the Conversation
Discussing money and end-of-life issues can be a difficult conversation. In order to address potential concerns and increase the chances that inherited assets will go to the intended recipient, parents need to discuss their plans with their children while changes to key documents are still possible. Emotions and differing expectations may collide in this conversation, but children need to know what to expect to avoid surprise (and the ensuing desire to litigate a deceased parent’s decision with which they disagree). In addition, parents may have their own concerns, such as family assets being divided in a child’s divorce. Unless a child lives in a community property state, (and Georgia is not one), gifts and inheritances can be retained as separate property if the proper steps are taken to avoid commingling these assets with marital funds. Advising children to coordinate with estate planning and family law attorneys is the best way to head off conflict and litigation.
Trusts are the cornerstone of complex estate plans and are another method of transferring wealth to children and protecting assets from division in divorce. Irrevocable trust property is not directly owned by a beneficiary and is thus more difficult to pursue by creditors or divorcing spouses. However, if a beneficiary has easy access to trust funds or is a sole trustee, courts may decide to allow a creditor to collect a debt from this asset or factor it into a divorce settlement. Appointing an independent trustee with sole discretion over distributions helps protect trust assets. Additional options to strengthen a trust against outside claims include naming multiple beneficiaries and creating generational (not age-based) trusts. Including spendthrift provisions, which block a beneficiary from assigning or pledging his/her interest, is an option to control who has rights to property.
An additional asset protection strategy is to place property into a corporation or limited liability company. Property owned by these entities generally are not subject to creditor claims against the owners. In most circumstances, the owners are not responsible for the liabilities of the company. Thus, wealthy individuals can shield investment property or other valuable possessions from unwarranted creditor claims; and heirs will have the option of deciding whether or not to keep entities intact or liquidate assets.
Contact an Asset Protection Attorney
Providing for your children and other loved ones is the goal of any parent, and the asset protection attorneys at MendenFreiman are here to help you achieve this goal. Helping clients in the Atlanta area for more than 20 years in asset protection and other estate planning strategies, MendenFreiman attorneys are here to guide you in creating financial security for generations to come. Contact us to schedule a consultation.