The property that someone acquires throughout their life will be the product of their hard work or their close relationships. They will typically expect to retain control over those resources until they die. Even then, an individual can control what happens to their property by creating an estate plan that designates beneficiaries to receive their assets after their passing.
People often take for granted that they will retain control and ownership of their assets, but they might face legal challenges that could undermine their ownership rights. Those preparing for retirement or putting together a comprehensive estate plan often include asset protection planning in the process because they want to protect their assets as they age and after they die as well.
What is asset protection planning?
The process of asset protection planning involves looking at someone’s current financial circumstances and seeking to identify points of vulnerability that could arise in the future. For example, medical creditors could seek to place a lien against an individual’s primary residence if they have hospital bills or unpaid fees from a nursing home.
Creditors can sue someone as a way of placing a lien on their valuable property or sometimes even forcing the sale of their property to pay what they owe. Creditors can engage in similar tactics after someone dies by bringing a claim against their state. Even Medicaid benefits needed to pay for someone’s long-term care in a nursing home could result in a sizable estate claim that forces the sale of their most valuable assets.
Asset protection planning typically involves changing how one holds ownership of certain assets to make it more difficult for creditors to take legal action against those resources. The creation of a trust can be an important part of an asset protection plan, as could the execution of a deed to alter how someone holds title.
Why asset protection planning matters
Those who have spent a lifetime paying off a mortgage and acquiring other resources deserve the comfort derived from their hard work in their golden years and to leave something meaningful for their loved ones when they die. Asset protection planning helps ensure that people can count on retaining resources as they age well also helping to protect what they leave for their beneficiaries after their death.
Those with an existing estate plan may want to revisit it to protect themselves and their legacy, and those just sitting down to create documents for the first time may want to discuss asset protection planning as an important component of that process. Thinking about what happens later in life and after one’s death can help an individual create the most effective and robust estate plan possible.