If you have finished your basic estate planning and are looking toward advanced planning for purposes of asset protection, you should understand how and why to guard your estate. An asset protection plan keeps your property and the property of your loved one’s safe from being taken to settle a lawsuit or for a divorce. By safeguarding your assets, you can ensure that you and your family will have a place to live and money for basic needs as well as things like higher education.

Learn Your Worth

The first step of asset protection is valuing your property. Much as you had to do with your basic estate plan, you need to make a list of everything you own and its value. Then you should consider all of your debts such as your mortgage, car payment and credit card balances. To get your net worth, simply subtract your debts from your total worth. Once you have your net worth, consider your financial and retirement goals. With these goals in mind, you will see why it is so important to save your property from being taken.

Decide What to Protect

Next you should work with your attorney to determine what of your assets are already protected and what unprotected items you should focus on first. A protected asset is exempt, and your ideal goal should be to make all applicable assets exempt.

Protect What You Have

After you understand what needs to be protected, your attorney may offer a variety of security options. Some common options include family limited liability companies or irrevocable trusts. There are also trusts to protect your IRA and Life Insurance Policy.

For spousal protection you may use an AB or ABC Trust, to split your assets and then allow the remaining spouse to easily inherit upon the death of the other. For your children, a separate life time trust for each child is a good option.

If you don’t want your child’s trust to last for his or her lifetime, you can choose an age when the trust holdings will convert to the beneficiary’s property. Be advised that when that happens, the property will no longer be protected from your child’s creditors or possible divorce settlements.

The important thing to remember with asset protection is that you must plan early. If you make a plan with a creditor judgment or lawsuit already pending, you may lose your assets if a judge reverses your protection action.

Tags: Asset Protection, trusts