Asset protection planning is proactive legal action that combines traditional estate planning with sophisticated legal techniques to protect and preserve the net worth of clients and future generations from potential legal liability. These techniques are designed to deter potential creditors from going after your assets and to impede their ability to seize those assets or collect judgments. With careful preparation and through the use of these clever methods, the attorneys at Carnahan, Evans, Cantwell & Brown assist clients in protecting their assets from future creditors, lawsuits, divorces, or judgments.
The techniques used in asset protection planning involve multiple practice areas. For example, your attorney might recommend that you use one of the following tools:
- Limited Liability Companies (LLCs): Many people prefer to transfer real estate titles into LLCs, which limit personal liability to potential lawsuits. Owners and investors enjoy the insulation of risk exposure as well as the benefits of pass-through taxation.
- Premarital Agreements: A couple may choose to enter into a premarital agreement (also known as a prenuptial agreement) prior to marriage to establish how their assets will be divided if they should divorce. Such an agreement can also address alimony, financial rights, the distribution of property to children from prior marriages, and the protection of spouses from one another’s debts.
- Cohabitation Agreements: A cohabitation agreement can be used by unmarried couples who have chosen to live together to protect their rights as a couple while at the same time safeguarding their individual assets and interests. Such an agreement may contain many of the same provisions found in premarital agreements and helps to avoid future conflicts in much the same way.
- Family Limited Partnerships (FLPs): A Family Limited Partnership is a limited partnership owned and controlled by members of a single family, with general partners (who manage the FLP and are held liable for it) and limited partners (who have no management authority and limited liability). FLPs are effective tools for wealth preservation as they can reduce the taxable estate of senior family members while allowing them to retain management control over the assets places in the FLP. Additionally, the use of an FLP protects those assets from the claims of future creditors.
- Multi-Generational Planning: To ensure that your wealth can be passed to future generations with limited taxable consequences, explore multi-generational planning techniques. For example, a dynasty trust can help families avoid or minimize taxes as wealth is transferred to subsequent generations. Additionally, a generation-skipping trust (GST) allows the grantor to limit their assets’ exposure to estate taxes by directly transferring the assets to grandchildren or great-grandchildren.
- Asset-Protection Trusts: An asset-protection trust covers a range of legal structures, including any form of trust in which funds are held on a discretionary basis to protect the assets from taxes and lawsuits.
These techniques can minimize or eliminate the necessity of probate, save a substantial amount of taxes through multi-generational wealth transfers, and protect beneficiaries from the potential claims of third parties. To ensure that you are able to take advantage of these benefits, you will need to start planning long before a claim arises. Attempting to shield property from an existing claim (including threatened lawsuits) is illegal.
If you would like to employ asset protection planning techniques to preserve your assets for yourself and future generations, contact Carnahan, Evans, Cantwell & Brown to discuss your short- and long-term financial goals. We can help you create a plan that works for you, your family, and your beneficiaries. To get started, give us a call at 417-447-4400 or contact us online.