For most people in America, asset protection probably doesn’t seem all that important. And even in cases where the average person might be a little concerned about the possibility of sued, insurance plans are usually the first option that comes to mind. If you have any real estate, stocks, inheritance, or other source of wealth, however, insurance may not be enough to provide the protection your assets need. Moreover, insurance cannot protect you against future creditors, help you someday qualify for Medicaid for long-term care, or deal with litigation that exceeds the coverage of your existing policies. To provide true safeguards against asset loss, these four asset protections strategies should be part of your comprehensive estate planning efforts.
Consider a Medicaid Planning Trust
At some point, it is important to realize that there is a good chance that you might someday need nursing home care. By some estimates, about half of today’s adults will require some sort of long-term care at some point in the future. It might be tempting to assume that your health care insurance or future Medicare benefits will cover those costs, but don’t allow such assumptions to lull you into complacency. The reality is that most insurance plans won’t cover those costs, and Medicare only pays for a maximum of 100 days of care under certain circumstances.
That will ultimately leave you scrambling for ways to cover costs that can exceed $200 a day! Even if you’ve managed to gather some assets together over the course of your lifetime, the last thing you want to do is see your estate slowly consumed by sky-high long-term care costs. To avoid that, you need a plan that protects your assets in a way that allows you to still qualify for the Medicaid program. A Medicaid planning trust can be one part of a comprehensive strategy to accomplish that goal.
This trust can enable you to shield assets from Medicaid, while also providing a steady income source that can help to provide for your spouse while you are in a nursing home. It can also offer a way to avoid Medicaid’s estate recovery capabilities, but providing a means for those assets to be transferred to your heirs when you die rather than being seized by Medicaid as repayment for benefits you received during your life.
Use Business Entities to Protect Yourself Against Liability
If you are a business owner, then your assets are always at risk – unless you’ve taken affirmative steps to shield them. This is often the case in instances where entrepreneurs operate their companies as sole proprietorships, without creating a formal business entity like a corporation or Limited Liability Company (LLC). In such cases, there is no legal distinction between you as an individual and your business – which means that your personal assets are not properly separated from your business assets.
If that’s the case, then anyone who sues your business will be suing you personally as well – and that could place critical personal assets like your home, vehicles, and other belongings at risk in any potential judgment. The good news is that you can create an LLC or other business entity to create the separation you need, and ensure that any lawsuit against your company poses no risk to your personal assets.
Structure Joint Accounts Properly
Review all of your accounts and make sure that you have everything properly structured to provide you with maximum protection. Sometimes, people choose to have joint accounts with their children, parents, or business associates. While those accounts can be helpful in many circumstances, they can also increase the potential risk that your money could be vulnerable to other account holders’ debts and liabilities. For instance, a joint business account with your partner could place your assets at risk of judgment if that partner is sued, receives a divorce decree, or faces actions from other creditors. Joint accounts should have minimal balances, with the bulk of your personal assets – or your share of any business assets – kept in accounts titled in only your name.
Increase Liability Insurance Where Necessary
For business owners, liability insurance is usually the main defense to protect assets from litigation and other loss. In all likelihood, you probably already have this type of insurance. The problem is that policies must be adjusted and updated to reflect growth in the business, as well as increased liability that you might face as your wealth grows. Remember, the more success you have in business, the greater a target your company becomes for any potential litigant seeking an easy payday.
If you have yet to purchase any sort of liability insurance, make it a priority to do so as soon as possible. If you already have insurance, then review your policy with your attorney and insurer to assess its current effectiveness. You may find that you need to increase your coverage to provide greater security – especially if your business has experienced any degree of serious growth since you first purchased the coverage.
Help is Available
You shouldn’t be under any illusions, however. Asset protection is serious business, and not something that should be approached without careful consideration of all of the issues involved. After all, you need to make sure that your plan covers all your bases, and is tailored to meet your unique circumstances. That requires professional assistance that can only be provided by an experienced estate planning attorney.
At Frank & Kraft, Attorneys at Law, our estate planning experts can provide you with the guidance you need to ensure that your assets enjoy all the protection available by law. Our work throughout the Indianapolis area has provided clients just like you with the comprehensive strategies that effective asset protection often requires, and we’ll bring that same level of commitment to your estate assets too. If you’d like to learn more about how these strategies and others can affect your efforts to protect critical business and personal assets, contact us at our website or give us a call at (317) 684-1100 today.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.