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