Personal Asset Protection Is Often An Afterthought
The main objective of an asset protection strategy is to safeguard your assets from any unexpected creditor claims, liens or lawsuits. In order to secure your assets from such unlikely but real threats, it is imperative, regardless of how much you own, to have a protection strategy for your estate.
The most effective asset protection strategy will depend on your individual financial picture as well as the likely exposure to potential litigation or creditors that may make a claim against you or any businesses or assets under your ownership or control. In order to be most successful, you must be willing to implement a plan, and in some cases, relinquish some degree of control.
4 Types of Asset Protection in NJ:
- Liability insurance
Liability insurance, such as an umbrella coverage policy, that can be added to your homeowner’s policy.
- Dividing assets
By dividing assets, a spouse can have sole ownership over some investments and other assets while you keep only essential assets, such as income, in your name. Creditors, in general, can only attempt to recover or lien assets in your name.
- Business entities
Creating business entities to hold valuable assets can add a great deal of protection to your estate. Business entities can provide the type of protection that can shield your personal and business assets from creditors. The business assets are shielded from personal creditors and personal assets shielded from business creditors. It separates the two assets from any potential liabilities that might arise.
- Establishing trusts
Certain trusts can also provide asset protection from claims. In general, the trusts must be set up in a way that they are irrevocable. The terms are such that you no longer control the assets in the trust. The terms of a trust are critical with each having its benefits and drawbacks. These trusts include:
- Spendthrift trusts
- Discretionary trusts
- Support trusts
- Blend trusts
- Personal trusts
- Self-settled trusts
- Medicaid planning trust
- Lifetime QTIP Trust
- Spousal Lifetime Access Trust
- Domestic Asset Protection Trust
- Irrevocable Life Insurance Trusts
- Standalone Retirement Trusts
- Each type of trust must be tailored to your specific situation and needs.
To fully protect your assets, a detailed strategy needs to be in place before any potential situation arises with creditors. You must take into account state law when considering the best asset protection strategy and keep in mind that states allow tactics that are sometimes aggressive for creditors to obtain assets.
With any asset protection strategy, an attorney is necessary to structure the plan and help determine the level of assets to be protected.
The ultimate goal of asset protection is to provide lifetime security and peace of mind knowing that you cannot lose what you own. A good asset protection plan will discourage lawsuits, remove the potential for someone to seize your wealth, reduce insurance costs, and most importantly protect your assets and safeguard your wealth.