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 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.
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 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.
- What You Need to Know about the Medicaid Look-Back Rule - January 3, 2023
- How to Pass Down Your Legacy in Your Estate Plan - October 3, 2022
- Practical Steps to Take after Receiving a Terminal Diagnosis - September 30, 2022