Asset Protection and Estate Planning—Essential, Compatible and Wealth-Saving BedfellowsJanuary 1, 2011
The typical reader of this column hates paying taxes. Beating up the IRS legally often is their favorite indoor sport. What tax do they fear the most? Hands down, it’s the estate-tax monster. To calm your fear, let’s start with a bit of good news: Your author, with the help of other experts, has learned how to win the estate-tax game. What does this mean? We have developed a system—used hundreds of times over the years—that can, does and will beat the estate-tax monster, every time, no matter how large your estate.
But face it, even a perfect estate plan, at best, is in reality a death plan, because nothing happens until you die. Then, and only then, will your assets go to your heirs (or into a trust, partnership or other entity for their benefit).
All very good. But wait, you ain’t dead yet. In the meantime are your assets protected for the rest of your life? Let’s take a closer look at your situation: Write your age here ____________ (and if married, your spouse’s age here ____________). If you are a guy and you wrote 41, your life expectancy is 77; at 52 it’s 78; at 63 it’s 81; at 74 it’s 84. Even at age 86 you have five more years to enjoy life. If you’re a gal, add three to four years.
What’s my point? Well, your death plan should protect your assets from the IRS when you die. But what about protecting your assets from today (the day you sign your estate-planning documents) until the day you go to that better place?
Sorry, but here comes the bad news: To be brutally honest, the reason almost all estate-planning advisors don’t offer asset protection is because they don’t know how. What about those advisors that rely on a software package? They are helpless; asset protection is not part of the package.
Just imagine going to the bank with a large amount of cash. Only a fool would not take the necessary precautions. In a like manner, it only makes good sense to protect your assets, starting today and until you go to the big business in the sky.
How and when should your asset-protection plan be done? The when is easy: When you do your estate plan, do a lifetime plan at the same time. Your lifetime plan must include your asset-protection plan.
Your lifetime plan includes such considerations as:
• How to deal with inflation;
• Succession planning for your business;
• What if one of your kids gets divorced; and
• A host of other issues unique to every family and business owner.
Next, the how of asset protection. For most law-abiding Americans, asset protection is a three-category subject:
1) Protect you and your spouse.
2) Protect your kids and grandkids.
3) Protect your business.
Before detailing the categories it is important to understand the goal of asset protection: to protect assets from possible lawsuits (even if you lose and are held liable), creditors, divorce claims and frivolous claims.
Here’s a list of the basic dos, don’ts and strategies to ensure your assets (wealth) are protected.