Asset protection planning is just for the wealthy or those with high-risk jobs, like doctors or lawyers.
Asset protection planning is for everyone. If you engage in any activity that could give rise to a lawsuit (drive a car, employ another person, allow people into your home, etc.), you are vulnerable to a lawsuit that could take everything you have.
Asset protection planning is about hiding assets from creditors.
Asset protection planning is NOT about hiding assets, keeping secrets, or defrauding anyone. Asset protection planning is about positioning your assets in a way that discourages lawsuits or prompts a mutually beneficial settlement.
My spouse just filed for divorce. Can I do asset protection planning now?
No, asset protection planning can only be done before a lawsuit or threat of a lawsuit is known. Asset protection planning is about planning ahead, not transferring assets only when you are at risk.
I am not sure if I need any asset protection planning. Are there some simple things I can do before transferring my assets into a trust?
Yes, although it is always better to seek the help of an estate planning attorney, there are some basic strategies you can use to do asset protection planning on your own. First, always make sure that you have proper insurance. Make sure that your homeowner's insurance is up to date and accurately reflects the current value of your home. If you own a business, make sure you have business insurance to cover any liability or losses that might arise so that your personal assets are not at risk.
Second, if you are married (and your state law allows for it), you and your spouse should own your home as tenants by the entirety. This type of ownership means that the creditor of one spouse cannot take your home. Depending on your state law, you may be able to co-own other property the same way with your spouse.
Lastly, make the maximum contribution to your 401(k) or IRA accounts. These accounts are protected from bankruptcy proceedings for you and your spouse (with certain limitations). This same protection, however, does not extend to an inherited IRA.