Transcript Protect whats yours: Strategies to safeguard your wealth

Not FDIC
Insured
May Lose
Value
No Bank
Guarantee
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Asset protection:
Preserving your net worth
• We protect our homes, cars, valuable possessions —
even household appliances
• What about our wealth?
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Lawsuits target “deep pockets”
“How a jury decided that a coffee spill was worth $2.9 million”
Wall Street Journal, September 1994
“Mall sued over squirrel attack”
Chicago Sun Times, August 2006
“N.J. woman hit with ball sues Little League player”
USA Today, June 2012
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Are your assets at risk?
• Do you own a home?
• Are you in a high-risk profession?
• Do you own a business?
• Does your business have employees?
• Do you own rental property or real estate investments?
• Do you have significant personal savings or other valuable assets?
• Do you drive a car often?
• Do teenage drivers live with you?
• Do you have pets?
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A critical part of
a financial plan
Investments
Saving for
retirement
Minimizing
taxes
Funding
education
Comprehensive
financial plan
Planning for
income in
retirement
Insurance
Asset protection
Estate planning
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A two-part plan to protect
your assets
1
2
Minimize your
risks now
Put a protection
plan in place —
before something
happens
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What asset protection is NOT
• An excuse or vehicle for evading taxes
• A method for hiding assets
• A way to defraud creditors
Source: Asset Protection Planning Guide: A State-of-the-Art Approach to Integrated Estate Planning, Barry S. Engel, David L. Lockwood, and Marc Merric.
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Build your protection plan
Basic components
Complex techniques
Insurance
Incorporating your business
Titling assets
Insulating “hot” assets such as
real estate
Homestead exemptions
Equipment leasing and
multiple LLCs
Protecting retirement and
college savings
Using trusts to protect
your assets
This material is for informational purposes only. It should not be considered legal advice.
You should consult with an attorney to determine what may be best for your individual needs
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Start with the basics
• Identify and correct property risks
• Review your insurance coverage
• Purchase umbrella liability coverage
• Apply for a homestead exemption
• Be careful when titling assets
• Identify and correct any potential risks associated with
property and real estate
• Maintain positive personal and professional relationships
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Are your retirement savings
protected?
Type of retirement
account
ERISA plans:
401(k), pension, profit
sharing, ESOP
File for bankruptcy?
No bankruptcy
Full protection
Full protection
Rollover IRA, SEP IRA,
SIMPLE IRA, most 403(b) Full protection
plans, Individual 401(k)
Not protected at federal
level, may receive
protections at state level
Traditional and Roth IRA
Not protected at federal
level, may receive
protections at state level
Protected up to $1 million
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How college savings
are protected
Federal protection in the event of Chapter 7 bankruptcy filing
Point of
contribution
Made less than a year before
filing: NOT protected from
creditors
1 year
After 1 year, $5,000 is
protected
720 days
Made more than 720 days
before filing: 100%
protected
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Is your business putting
personal assets at risk?
Business owners may be at risk of legal claims
by patients, customers, or employees
Without a formal business structure,
your personal assets may be at risk
Select a method of ownership for your business
to make it difficult — or expensive — for
someone to access your assets
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Structuring your business
Business
ownership
Benefits
Considerations
Corporation
(C corp or S corp)
• Business owner does not bear • May be more complex to
personal liability for debts of
establish and maintain
the corporation
• Adverse legal judgment
could result in plaintiff
receiving ownership shares
LLC or LLP
• Easy to establish and
maintain
• Some states may allow
creditors to attach
ownership interest of LLC
• Potentially better liability
protection than corporations; or LLP
creditor attachment may be
limited to distributions, not
shares of ownership
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Insulate “hot” real estate assets
Separate LLCs can insulate risky assets from personal assets
Personal assets
• Primary residence
• Bank accounts
• Investments
• Personal belongings
LLC #1
Summer
rental
cottage
LLC #3
Commercial
real estate
LLC #2
Apartment
building
Liability for one
property won’t affect
other properties or
personal assets
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Example: Using leasing and
multiple LLCs to protect assets
LLC#1
Equipment
Medical
practice
The medical practice
leases office space and
equipment from the
LLCs
Equity in these
assets is NOT
contained in the
medical practice,
where it could be
at risk
LLC#2
Real estate
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Using trusts to protect
your assets
Type 0f trust
Irrevocable trusts
Asset protection considerations
• Typically prevent trustee from making distributions to
satisfy creditors of the trust beneficiary
Offshore or
foreign trusts
• Trustee is not subject to jurisdiction of U.S. laws and courts
• Creditors may find these assets more difficult/expensive to
target
• Certain court cases have exposed limitations
Domestic asset
protection trusts
• Trustee and beneficiary are same person
• Designed specifically to protect assets from creditors
• Relatively new, available in a few states; lack of existing
case law to provide precedent of their effectiveness
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Your action plan
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Meet with your financial advisor
Review current assets and determine your net worth
Take care of basics, such as insurance coverage
Identify and minimize any prevalent risks
Consult with an attorney
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