The Wealth Advisor
Almost everyone knows someone who had a problem and lost everything. Claims can, for example, allege professional liability, responsibility for a car accident, or unpaid creditors. Whether meritorious or not, defense can be enormously costly. With our litigious society, with limited risk for those making liability claims, asset protection planning has become required for many and highly desirable for many more.
In this issue of The Wealth Advisor, we will provide an introduction to asset protection planning (what it is, types of risk, when to plan, what to expect in the planning process, and levels of planning) and how you can get started.
What is Asset Protection Planning?
Types of Risk
As a general rule, nobody can limit their own professional liability through a legal device. That’s why professionals carry malpractice insurance. But there are other areas of risk against which professionals can and should protect themselves.
Professional and Personal Liabilities of a Partner
Non-Professional Personal Liabilities
Other General Liabilities
When to Plan
The Planning Process and What to Expect
1. An Initial Meeting: During the first meeting, the advisors will gather basic financial information, determine your objectives and begin to establish a relationship with you. They will also set some reasonable expectations for how asset protection planning works, including how the laws work and what you can expect.
It is important that you are honest and forthright in providing the information requested. At the same time, because the very nature of asset protection planning can involve current worry about potential risk and/or litigation, it is important to determine early how much information you are willing to share and should share with various members of your advisory team. For example, it may be vital to preserve attorney/client privilege and not share litigious information with non-attorney advisors who could be subpoenaed later.
2. An Advisors Meeting: After the initial meeting, the advisor team will usually meet without you to review your objectives, discuss various legal and financial solutions and determine a consensus solution.
3. A Solution Meeting: Here the advisor team will present a unified solution plan, including all legal and financial components, to you. Because many of us are living into our 90s, your plan should be flexible enough to accommodate changes over 20 or more years.
Have Reasonable Expectations
Funding the Plan
Levels of Asset Protection Strategies
Planning Tip: Asset protection planning is a complex area, and as you start to become familiar with these tools, you will begin to understand why a team of advisors is usually needed to accomplish your goals.
Remember, the best time to plan is before a claim arises.
TEST YOUR KNOWLEDGE ABOUT ASSET PROTECTION PLANNING
1. Most asset protection plans hide your assets so creditors cannot find them. T F
2. Health care professionals do not have to worry about asset protection. T F
3. The best time to plan is after a claim has been filed against you. T F
4. Most asset protection plans can be created in just one meeting. T F
5. Asset protection planning will absolutely protect all of your assets. T F
6. Attorney/client privilege extends to all members of your planning team. T F
7. Funding the plan can usually be completed in less than a month. T F
8. State and federal law exemptions have limited effectiveness because they only
9. Creating business entities can be a viable means to protect your assets. T F
10. Asset protection planning can’t hide your assets, but it can make your assets
Answers: All of the above are false except 8, 9 and 10.