Having nearly five decades of financial planning experience, here is the “Leader Board” of Asset Protection Mistakes I see most people making.
Most everyone believes that “bad” things happen only to other people and there is no need for them to plan today.
This is the most common planning obstacle for our clients. Their life experience tells them that “bad” things happen to others and never to them. It is like it’s unthinkable. This usually means that they wait until something happens to them i.e.: (a business decline, a loan default, a car accident, a lawsuit, etc.) and then rush to plan. (This is especially a bad idea with Covid issues now and their effects on smaller business owners.)
Planning after the fact may be possible but it is much more difficult and more expensive.
Is that most folks do not realistically know what will happen once a judgment is entered against them.
Because most people do not have the experience of being sued, there are often unrealistic expectations as to what will happen. Holding on to the belief that bad things happen to others, a great many defendants and debtors hold on to their hope that somehow the bad thing will go away. The lawsuit will be dismissed, they will prevail, the plaintiff will obtain a judgment and not pursue, they will pursue a judgment but not be able to collect.
Most folks have no idea they can lose their home no matter what happens.
This is likely the most common blind spot for our clients, especially today when firearms sales and concealed carry licenses are at record highs in every state.
For various reasons, when we speak to a new client, they believe that no matter what happens they will get to keep their home. That may be true in some states, like Florida and Texas, but is not true in most states.
A judgment creditor can place a lien on the debtor’s residence, and once the lien is in place, they can move forward with a judicial foreclosure. Which means that their house will be sold, income taxes must be paid, belongings must be packed up, etc.
Many people think they can gift all their assets to their children and think it is a fool-proof method of protection. It seems natural and common to gift assets to children, right? They are the obvious objects of a parent’s bounty, it is easy to do, and there is a perceived retention of control.
However a creditor will have an easy time challenging a last minute, gratuitous transfer to any person, including children.
They will do so by filing a voidable transfer lawsuit against the transferee – the child. Children may also be subject to their own lawsuits and claims, divorce actions and such.
We strongly advise clients to avoiding gifting assets to children. It is much better to transfer assets into a trust for the benefit of the children.
Many people are simply paralyzed with fear, don’t know what to do and think that it is too late to plan once a lawsuit has been filed. (Everyone seems to have heard the rumors that once a lawsuit has been filed it is too late to plan. That is simply not true. While the planning may be less effective and some options will no longer be available, maybe a lot could be done to improve your negotiating position.)
Not having enough insurance, or any at all, including liability umbrella insurance can be a problem. Most claims and lawsuits can be covered by insurance if there is a policy in place at the time of claim or lawsuit. We strongly urge all our clients to carry significant insurance coverage, especially umbrella. Umbrella insurance is inexpensive and covers a broad variety of claims.
Many people consider living trusts to be effective creditor shields. The purpose of a living trust is to avoid probate and help deal with incapacity. Because a living trust is revocable, there is no creditor protection. As a matter of fact, state law specifically provides that creditors can pursue assets titled in a revocable trust. All asset protection trusts are irrevocable. Gem State Paralegal Planning is in touch with a dual purpose trust from a very prominent attorney that serves both irrevocable asset protection needs and revocable trust probate avoidance needs.
Concerns about the past inflexible nature of irrevocable trusts prevent solid planning. Historically, irrevocable trusts have been “cast in stone.” We could not change them or retrieve our assets. As mentioned that is no longer true. We are now capable of drafting irrevocable trusts that allow our clients to retain control, retrieve their assets and make changes to the trust agreement.
We find some sophisticated people worried about offshore service providers and keep assets onshore. For many Americans, “offshore” is a dark and mysterious world that belongs in a novel. While there may be offshore jurisdictions that are like that, many are well-developed countries, with transparent and accountable trust and financial institutions and government oversight. We are mindful of working with long established and reputable service providers that will not only look after our clients’ best interests but will also preserve our clients’ funds.
Many folks believe that they do not have enough assets to protect. Whatever you have is, by definition, everything that you have. You should fight to keep and preserve your assets. Claims and lawsuits are not limited to the very wealthy. Clients with modest estates who found it of paramount importance to keep their homes and life savings are quite important too.
New legal services have created documents for you to blend your estate planning with your asset protection at surprisingly low costs. You can avoid having to worry about not taking care of your senior age planning and enjoy bullet proof asset protection immediately, and address needed planning for nursing home costs, all with one affordable document.
The right legal documents can do that for you and more, including tax savings, privacy and anonymity and the elimination of probate and guardianships. For more information click on “Schedule a Call” button in the upper right corner.
Asset protection is not only for common liability reasons; for folks age 50 and over the costs of senior care must be addressed. Part of our Medicare premiums we have paid over the years and other cost sharing processes (variable from state to state) provide for Medicaid benefits for long term care, in home health care and nursing home expenses.
Click the link below for survey results of these senior care costs in your area.
Compare Long Term Care Costs Across the United States
Attorney K. Gabriel Heiser shared that he recently discovered a very helpful website run by Genworth, an insurance company that offers long-term care insurance as part of its products.
On the site, you can simply click on your location (state or city) and immediately see the current cost of long-term care per week, month, or year. The figures are averages, of course, and any particular facility may charge more (or less). Genworth’s figures are based on surveys of over 15,000 locations.
Click here to go to the site: https://www.genworth.com/about-us/industry-expertise/cost-of-care.html
In short, my point is that no matter where you live, each state has a cost share formula for us to be eligible for Medicaid benefits to cover senior care expenses. That cost share is a total asset deductible of everything you own, including your house.
On average we need to be broke. Stripped down to ~ $2,000 in total assets and stay broke on a monthly basis to continue the benefits.
Attorney Heiser designed, and copyright protected a specialized trust for you and me to control most of our total assets without our ownership, so we and our families can keep our assets in trust name, for future personal and family use via the trust, and for any desired gifting or distribution by our will.