About Protecting Assets

Individuals and families often seek out asset protection to reduce their expenses from taxes, aggressive debtors, lawsuit damage-seekers, divorce and more. In some cases, the attempts at asset protection can actually have the reverse effect, as concealing assets from creditors and criminal investigators is in many cases considered a crime. Despite this, when conducted responsibly asset protection is an integral component of financial planning, particularly in limiting the damage done by crises.

Function

Most people who go looking for asset protection are primarily looking for a method to pass on funds and property in an orderly fashion to heirs after the death of one or more family members, without subjecting the property to estate taxes and requiring property to go through probate court or be subject to a will dispute. A living trust is the most common method of asset protection. Money, brokerage accounts and property are allocated to the trust and then distributed on a fixed schedule to the heirs.

Features

Trusts, anonymous accounts or other such mechanisms that are used to either evade taxes or prevent creditors from suing to collect lawfully owed funds are illegal. If a trust company or any other service offers the ability to avoid paying taxes, it is a de facto criminal operation. Doing business with such a company could result in losing all of the money in a scam, or you could end up paying fines or being convicted of a crime.

Considerations

There are many methods to protect certain assets from creditors legally. Legally recognized retirement accounts are tax advantaged and more difficult for creditors to collect from. Education 529 savings accounts also have privileged protection status. Inter vivos gifts to heirs--gifts made while someone is still alive to a future heir--can also help to reduce taxes in an estate transfer, especially when the funds involved are greater than $1 million.

Prevention/Solution

Purchasing an annuity insurance package can protect assets from taxes and collection while creating predictable retirement income. Annuities can also be sold to third parties before they expire for cash if necessary to avoid paying withdrawal or early termination penalties. Insurance policies on property and automobiles can also be transferred through a trust to heirs in a secure manner.

Benefits

Coming up with a sensible asset protection and transferal program can keep huge amounts of assets out of the hands of the government and other associated creditors. Orderly liquidation of assets like homes, cars, artwork and other such assets can also reduce the amount of taxation and other complications involved in wealth transfers. Update the will regularly to reflect changing circumstances; it should be a living document with a clearly elucidated plan for the distribution and liquidation of all existing assets.

Resources

• FederalReserve.gov: Consumer Handbook to Credit Protection Laws
• Free Law Advice: Asset Protection Scams
• Cornell Law School: Estate Planning

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on 10/7/2009 www.swissprivatebank.com offers first class asset protection services.