How Do I Protect My Assets?
There are many tools that will help you protect the assets that you have worked so hard to earn. They include protecting them during your life from creditors and predators. They include protecting them after your life from creditors, predators and even your beneficiaries themselves.
Your First Line of Protection is Adequate Insurance
Insurance is your first line of protection for events that can strip you from your assets: automobile insurance, homeowner's insurance, medical insurance, disability insurance, long term care insurance, malpractice insurance, and the list goes on. There is insurance for most risks.
Use LLCs to Shelter Assets
An LLC is a form of business entity that can protect assets outside of the LLC from liabilities arising from the assets owned by the LLC or from the business activities of the LLC. Strategic use of LLCs offers an excellent way to protect assets from creditors and predators.
When Does a A Revocable Living Trust Protect My Assets?
A revocable trust provides no asset protection for the trust making during his or her life.
Trusts for the lifetime of the beneficiaries provide prolonged asset protection for the trust assets. Lifetime trusts also permit your financial advisor to continue to invest the trusts assets as you instruct, which can help ensure that trust returns are sufficient to meet your planning objectives. The second caveat follows logically from the first; the more rights the beneficiary has with respect to compelling trust distributions, the less asset protection the trust provides. Generally, a creditor 'steps into the shoes' of the debtor and can exercise any rights of the debtor. Thus, if the beneficiary has the right to compel a distribution from a trust, so too can a creditor compel a distribution from that trust.
How Can I Protect My Inherited IRAs ?
Premature plan owner deaths and minimum required distribution rules are designed to never force retirees to exhaust their IRAs and qualified plans. The result is that those two factors transfer a significant portion of assets to the owners' beneficiaries. The owner's will or trust does not determine who are the beneficiaries or how the payout is made. Those are determined by each account's beneficiary designation. That designation determines who is the beneficiary and whether the money is given outright to a beneficiary or held in trust for a beneficiary's benefit.
In addition to tax, naming a beneficiary outright to accomplish tax deferral with a tax-qualified plan has other disadvantages. First, if the beneficiary is very young, the distributions must be paid to a guardian; if the beneficiary has no guardian, a court must appoint one. Another disadvantage is the potential loss of creditor protection or bloodline protection particularly where the named beneficiary is the surviving spouse. A third, practical disadvantage is that many beneficiaries take distributions much larger than the required minimum distributions. In fact, studies show that beneficiaries consistently consume "found money" in only a couple of years regardless of the amount in the account or the age of the beneficiary.
Structuring tax-qualified plans to provide the longest term payout possible is the most common option to allow the maximum tax-deferred growth. With this strategy, you name beneficiaries in a way that requires the beneficiaries to withdraw the least amount possible as required minimum distributions (those distributions that the beneficiaries must take in order to avoid a 50% penalty). Frequently, married clients name the surviving spouse as the primary beneficiary so that the survivor may roll over the account into his or her name and treat the account as his or her own. The surviving spouse then names younger beneficiaries for stretch-out purposes. To achieve the maximum "stretch-out," you should name beneficiaries who are young (e.g., children or grandchildren, although there are special considerations when naming grandchildren or younger generations). The younger the beneficiary, the smaller the required minimum distributions. To achieve maximum income tax deferral, beneficiaries should take only their required minimum distributions.
There are many other planning tools that my serve your personal needs.
I would be pleased to consult with you about preparing a tailored plan that protects your assets.