Asset protection planning looks different for every person based on their goals. If you or your family feels concerned about the transition of wealth, a plan may protect your estate. If someone in your circle needs protection from poor choices or a high-risk problem, you may especially need to think about how your assets will weather the future and continue to benefit your family. You may protect your assets through many different legal frameworks that work specifically for your situation.
Why Would I Need an Asset Protection Plan?
You may need to protect your assets if there are issues that may affect your bottom line in the near future. Areas of concern include if you or a loved one:
- Makes poor choices and you want to institute measures to protect them
- Currently has creditor or liability problems, or might have them in the future
- Spends money too freely or already lives beyond their means
- Works in a high-liability profession or business
- Might go through a divorce
If any of these situations apply to you, an asset protection trust can support your goals as part of your estate plan. Because every family is different, your particular needs and circumstances guide legal professionals in choosing the right type of trust for you. Working with an asset protection strategy attorney can help you protect your assets from liability or loss after you pass away.
Perhaps your estate plan includes gifts of money for each of 10 grandchildren. However, the amount you plan to leave them each is significant. Let’s say that one of your granddaughters has a drug addiction problem. She has stolen from her parents and no one even knows where her permanent address is anymore. In this case, you may want to open a trust that metes out a small amount of inheritance each month rather than giving her an entire lump-sum inheritance.
Another type of problem where a trust may implement a level of protection is when an heir has a gambling problem or spends money freely without thinking. Certain types of trusts can help them spend their inheritance more wisely.
Perhaps a trust allows spending only for specifically named items or at certain times or ages. A 22-year-old granddaughter may need a trustee in charge of what she may spend the money on until she reaches the age of 32. A 45-year-old son who has a gambling addiction may need approval from a trustee before each purchase.
With an Asset Protection Planning Trust, you set the parameters for how an heir may spend the assets in the trust.
Special Needs Trust Planning
Another situation where a trust may be a good idea is when someone has special needs or disabilities. A differently-abled person often receives government benefits that include health insurance, housing, and medical care. If a special needs person on governmental disability receives a large inheritance, they could lose their benefits until they spend down the inheritance monies.
Alternatively, establishing a trust that gives a small amount each month over a period of time can give your special needs beneficiary a gift they can use for future needs.
Avoiding Bankruptcy & Creditors
Anytime you plan to give money to a relative as a gift or a legacy, there is a chance that it will not benefit them. For example, let’s say your middle son owns a home that is in foreclosure and has a hundred thousand dollars in credit card debt. In this case, you could throw money at a pit of bankruptcy rather than benefit your son with an inheritance. With an asset planning trust, you can prevent your son from owning the whole lump sum amount all at once. Instead, the trust parameters might establish a sum of $300 per month until the fund’s depletion.
Or let’s say you have a daughter who is known to spend beyond her means anytime she has money in the bank. You know that giving her an inheritance of $40,000 will mean nothing to her beyond a month’s license to shop until she drops. In this case, a trust can give her a certain amount each month or even mandate what she may spend the inheritance on. The trustee you place in charge of the funds manages the monies in the way you layout in the trust’s legal documentation.
Divorce in the Family
When you give an inheritance to a married grown child, there is always a chance of divorce. Let’s say you give $60,000 to a grown daughter, and she places the money into a joint savings account with her husband. If they divorce, most North Carolina divorces end in an equitable distribution of 50/50 division – meaning each spouse receives half of the estate. So, in this case, if the husband divorces your daughter, he can likely take half of the inheritance you meant for her.
Your daughter would not own money or assets placed in a trust. Therefore, the husband could not include the trust assets in the equal division of marital assets. The divorce court would never include the trust since it does not belong to her. Instead of losing half her inheritance, a trust could give her an amount suitable each month for the rest of her life or until the funds run out. A trust could even allow for significant expenses deemed suitable by the trustee you appoint to manage the trust.
Making Your Plan
You can easily see how an asset planning trust may protect your wealth for future generations. Besides the situations above, other risks of not opening a trust can include losing a family home to Medicaid Recovery in NC, losing your nest egg to nursing home costs, and poorly executed family business transitions. Protect your assets by implementing trusts designed specifically for your family situation.
We Can Help
At Vail Gardner Law, we want to help you protect your wealth and your legacy. We work with families and individuals to set up trust planning that protects your wealth from unexpected costs. Planning for a future in which your family feels taken care of is part of making your asset protection plan. Talk with me about your family and your needs. Contact me today and find out how I can help you leave a legacy.