Your estate plan is a primary component of your legacy that you count on to honor – and in some cases, continue supporting – your loved ones, family members, and the causes that are important to you. As such, asset protection strategies are paramount to ensuring that your entrepreneurial wealth is maximized in accordance with your final wishes. Call the experienced Arizona estate planning attorneys at Harrison Law, PLLC, at (480) 320-2310 for more information about protecting specific assets and your wealth overall in relation to your estate planning.
Understanding Asset Protection
Protecting one’s assets in relation to estate planning is not a cookie-cutter process. Your overall asset protection plan may not look like your neighbor’s or like your business partner’s asset protection plan. An important point to keep in mind is that asset protection refers to a set of legal tools that allow individuals to protect specific components of their wealth from all of the following:
- Lawsuits
- Excess taxes
- Debts
Those who need to focus significant attention on asset protection generally include individuals with significant wealth, but there are specific occupations that increase the need for focused asset protection strategies, including:
- Business owners who employ others
- Real estate investors
- Professionals who have built up lucrative practices, including doctors, medical specialists, and attorneys
Asset protection can also help shield one’s wealth in the event of divorce, and some of the primary mechanisms for doing so include valid prenuptial and postnuptial agreements.
Asset Protection Strategies for Preserving Your Entrepreneurial Wealth
Arizona State Legislature’s laws regarding estate planning are complex, which makes it important to consider having the professional legal counsel of the trusted estate planning attorneys at Harrison Law, PLLC, on your side. There are, however, a wide range of universally beneficial asset protection strategies that entrepreneurs should be aware of.
Limited Liability Business Entities
An exceptionally powerful means of protecting one’s assets is ensuring that business entities are organized in a manner that protects them from unnecessary liability, which allows business owners to separate their business assets from those that belong to them personally. Limited liability companies (LLCs), according to the Arizona Corporation Commission, are separate legal entities in which the owners are not held personally responsible for any claims that are brought against the companies themselves, including the following:
- Legal claims brought by clients
- Legal claims brought by customers
- Legal claims brought by creditors
Asset Protection Trusts
Asset protection trusts (APTs) are often considered the gold standard when it comes to asset protection tools. APTs are a specific kind of irrevocable trust in which the owner of the assets in question can simultaneously be both the trust’s settlor – or the person who creates the trust – and the trust’s beneficiary. In an APT, the personal assets the settlor includes are transferred to the trust itself, which is then managed by a third-party trustee who is assigned by the settlor. As a result, the assets in the APT no longer belong to the settlor but are, instead, owned by the trust, which the settlor can continue to benefit from and control via instructions to the trustee. It has proven very challenging for those with claims against parties whose assets are protected in APTs to gain access to said assets.
Liability Insurance
Liability insurance can prove very effective at protecting an individual’s personal wealth in the face of claims against his or her estate. Prime examples include:
- Commercial liability insurance
- Homeowners insurance
- Workers’ compensation insurance
- Long-term care insurance
- Umbrella policies, which offer additional coverage once one’s primary coverage is exhausted
- The creation of captive insurance, which refers to insurance coverage that is wholly owned by those who are insured
Retirement Funds
Many employer-sponsored retirement plans offer more robust protections than personal assets tend to afford in the face of lawsuits or of pursuit by creditors. Further, they can also offer exemptions from bankruptcy proceedings and tend to incorporate solid tax benefits.
Exercising Discretion
Exercising discretion is not only the better part of valor but should also play an important role in one’s asset protection strategies. Discretion in this context means not broadcasting the extent of one’s wealth to the outside world, which can make entrepreneurs targets for those who turn to litigation at the slightest provocation.
Separating Assets from Owners
Many of the asset protection strategies that are the most beneficial and are the most commonly employed include those that help separate one’s assets from oneself to the degree possible. When an individual is sued personally, all the assets that are held in the person’s name directly can be used to cover any impending court judgements or settlements. Several options when it comes keeping one’s assets separate include:
- Gifting the assets that an individual plans on ultimately leaving his or her loved ones and family members to them now
- Ensuring that one’s business entities experience limited liability, such as by organizing them as LLCs
- Holding the bulk of one’s assets and savings in asset protection trusts
Turn to an Experienced Arizona Estate Planning Attorney for the Skilled Legal Guidance You Need
Your estate will be passed to your family members, loved ones, and the causes that mean the most to you when the time comes, which makes it essential to protect your legacy. Toward this end, there are a variety of asset protection strategies that can help you protect your entrepreneurial wealth in the face of liability, excess taxes, and other threats. The knowledgeable estate planning attorneys at Harrison Law, PLLC, dedicate their practice to helping clients like you protect their assets – in support of their estate planning goals and the ongoing financial security of their loved ones. If you are ready to explore your options as they relate to ensuring that your wealth passes in accordance with your wishes, please do not hesitate to contact or call us at (480) 320-2310 for more information how we can help you today.
© 2023 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved
This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.
