It is a terrible feeling to find yourself in a difficult situation that you could have prevented if you had taken action in advance. This definitely applies to asset protection planning because a lot of people put it on the back burner until it is too late.
Limited Liability Company
If you are a small business owner, you should definitely use an asset protection structure to separate your personal interests from your business interests. A limited liability company or (LLC) can be the ideal choice for a wide range of business people.
When you establish an LLC, generally speaking, your personal property would be protected if creditors or other litigants initiate an action against the business. There is an exception if you are personally responsible for causing an injury while you are conducting business.
The asset protection works in both directions. If you are personally sued, the business assets would be protected under most circumstances.
A limited liability company will only protect assets from future claims. You cannot use an LLC to protect assets after you know that a legal action has been initiated. This would be an illegal fraudulent conveyance.
Family Limited Partnership
Another asset protection structure used by some business owners, professionals, and investors is the family limited partnership (FLP). As the name indicates, the people in the partnership would be members of the same family.
If you are the individual establishing the family limited partnership, you would be the general partner, and family members you bring into the fold would be limited partners.
An FLP is not a democracy when it comes to decision-making. The general partner has complete authority to make all decisions on behalf of the partnership.
Property that is held by the partnership would be protected if any partner is personally sued. Conversely, the personal interests of the respective partners would be protected if an action is initiated against the partnership.
It is possible to create more than one family limited partnership to limit exposure. For example, if you own two apartment buildings, you can convey each of them into a separate family limited partnership.
If someone files a lawsuit because they were injured in one of the buildings, the other one would be protected, and the personal property of partners would also be out of harm’s way.
Other Types of Asset Protection
Umbrella insurance is another way to protect assets. This can be purchased by a business owner or an individual, and it would provide a benefit if costs exceed the limits of the standard insurance policy.
If you are bringing significant resources into a marriage, you may have concerns. Under these circumstances, you can enter into a prenuptial agreement to establish terms that protect your interests.
With regard to protecting the inheritances that you want to leave to children from a previous marriage, you could use a legal device called a qualified terminable interest property (QTIP) trust.
Your surviving spouse would be able to receive distributions of the trust’s earnings for the rest of his or her life. They could also use property that is owned by the trust, but they would not be able to change the terms.
After the spouse’s passing, your children would inherit the assets that remain in the trust.
Nursing home costs could potentially consume your all or most of legacy because Medicare does not pay for long-term care. Medicaid will pick up the tab, but you can’t qualify if you have significant assets in your name.
You could convey assets into an irrevocable Medicaid trust to establish a financial profile that will lead to eligibility.
Schedule a Consultation Today!
We are here to help if you are ready to work with a Charlotte, North Carolina or Huntersville, North Carolina estate planning lawyer to put a plan in place. You can schedule a consultation appointment if you call us at 704-944-3245.
The number for our location in Ashland, Kentucky is 606-324-5516, and the number for our Florence, Kentucky office is 869-372-6655. You can also use our contact form if you would rather send us a message.