Like just about everyone, you undoubtedly want to protect the assets you have worked hard to acquire. Whether you are just starting to build up your asset portfolio, are at the height of your investment years, or are no longer actively building your asset portfolio because you are heading into retirement, you certainly do not want to put the assets you have at risk. Unfortunately, you may be doing just that in ways you haven’t thought about before now. The good news is that there are ways you can protect your assets by incorporating asset protection strategies into your comprehensive estate plan. Because your asset portfolio is unique, the best way to decide which strategies are best for your plan is to work closely with an experienced North Dakota estate planning attorney. There are, however, some commonly used asset protection strategies that everyone should understand.
Understanding the Risks to Your Assets
Knowing how to protect your assets begins with understanding how those assets might be at risk. You have probably already considered some of the common threats to your assets; however, there is a good chance that some of the risks are things you have never thought of before now. Some of those risks include:
- Divorce – while your own divorce certainly creates a risk to your assets, the risk is not limited to your divorce. An adult child’s divorce can also be a risk. Imagine, for example, that you gift your entire estate to your only child. Not long after your death, that child goes through a contentious divorce. If your child failed to protect the inheritance you passed down by keeping it separate from other marital assets, your child’s spouse could wind up with half of your assets in the ensuing divorce.
- Economic downturn/bankruptcy – an economic downturn and/or the need to file for bankruptcy protection can always put your assets at risk.
- Business failure – do not make the mistake of assuming you have structured your small business in a way that your own personal assets could never be at risk.
- Beneficiaries – almost every family has at least one family member who simply should not be trusted with a large sum of money or with valuable assets because the money/assets will inevitably be squandered on an addiction or simply wasted because the beneficiary is not good managing money.
- Nursing home costs – if you need long-term care later in life, and you turn to Medicaid for help covering the costs of that care, your assets could be at risk if you failed to include Medicaid planning in your estate plan well ahead of time.
Top 3 Commonly Used Asset Protection Strategies
Now that you are convinced your assets might really be at risk, consider the following commonly used asset protection strategies that might be used to protect them:
- Medicaid trust – one threat to your assets you may not have given much thought to is the high cost of nursing home care. Those costs may result in your need to qualify for Medicaid which, in turn, puts your assets at risk if you failed to plan ahead. Including a Medicaid trust as part of a larger Medicaid planning component is a common solution. A Medicaid trust is an irrevocable trust into which you transfer assets that would be considered non-exempt for purposes of determining your eligibility for Medicaid. By transferring the assets into a Medicaid trust your assets are protected because they are no longer consider part of your estate for purposes of qualifying for Medicaid.
- Dynasty trust – unlike most trusts that are focused on distributing assets, the goal of a dynasty trust is to keep the assets in the trust for generation after generation. In other words, a dynasty trust is used to protect the family fortune from all types of potential threats, including creditors, spendthrift beneficiaries, and economic downturns.
- Qualified Terminable Interest Property (QTIP) trust – this is a trust that allows you to provide for a spouse after your death while maintaining the ability to control what happens to the trust assets after your spouse dies. In other words, you can take care of your spouse and still be certain the trust assets are distributed to your children upon the death of your spouse.
If you have additional question or concerns regarding asset protection strategies, contact the experienced North Dakota & Minnesota estate planning attorneys at German Law Group by calling 701-738-0060 to schedule an appointment.