People frequently make the mistake of associating an asset protection plan with an attempt to illegally hide assets or defraud creditors. When created with the assistance of an experienced estate planning attorney, an asset protection plan is simply a perfectly legal way to protect your hard earned money and assets. An asset protection plan can also be used to help you, or a loved one, qualify for state or federal benefit programs if necessary without having to use up all of your resources first. Creating an asset protection plan is not only perfectly legal but is a financially smart estate planning strategy.
Protecting current assets can be done in one of several ways. Insuring assets is a common tactic used by many people. Just as you insure your vehicle in the event that you are at fault in an accident, you can insure your home, your business, even your professional license against liability as well. You may also wish to consider transferring assets into state or federally protected asset categories such as retirement plans or joint tenancy. Transferring assets into another entity entirely that cannot be reached by creditors is also an option.
Future assets are easier to protect still. A spendthrift trust works as an excellent asset protection tool when created properly. Unlike other trusts, you cannot be the trustee of a spendthrift trust if you are the beneficiary. The trust must also be completely discretionary and there must be a possibility that assets will be distributed to other beneficiaries, such as your children, down the road.