An estate plan is highly personal. A testator who is creating documents has to think about their family and their personal wishes at length. They may need to name a guardian for their children or arrange for someone to care for a pet after they die.
Many times, estate plans address someone’s needs and comfort later in life, not just the protection of their legacy after their passing. An asset protection plan can be a very important inclusion in modern estate plans. Asset protection planning can serve an important role both later in someone’s life and even after they die.
What does an asset protection plan include?
Every asset protection plan is different from the next. Someone’s circumstances, estate planning goals and resources determine what plans they need to establish. Oftentimes, asset protection planning involves the creation of a testamentary document, like a will. However, that is quite common for people to create trusts as a means of protecting assets from creditor claims and probate litigation. Assets held by trusts are not part of someone’s estate and therefore don’t pass through probate court. They also often have protection from creditor lawsuits and other forms of litigation that might transpire later in a testator’s life.
Asset protection planning often also involves the creation of living documents. Someone needs to leave instructions about managing their finances in the event of an emergency to protect their property if they cannot pay their bills. Powers of attorney can ensure the right person has the authority to manage someone’s finances when they cannot.
How do asset protection plans help?
By changing ownership and providing clear forms of support, asset protection plans limit the risk to key resources during times of crisis. An asset protection plan can prevent assets from becoming part of someone’s estate and therefore keep them out of probate court. The plan can also shield resources from collection activities, lawsuits and even divorce. Asset protection planning can reduce the economic risk that could arise during a period of incapacitation or later in life if someone experiences profound cognitive decline.
The best estate plans include not just clear testamentary documents but also asset protection plans to protect someone’s comfort and financial stability as they age. Adding asset protection planning paperwork to an estate plan can be a valuable move for anyone who is concerned about their legacy or their financial stability later in life.