Estate planning can seem complicated, but often it’s just because the vocabulary isn’t familiar. Here is what you need to know about asset protection:
- What is asset protection?
- What risks should I protect against?
- What timelines should I consider when it comes to protecting assets?
- What tools can I use for asset protection?
What is asset protection?
Asset protection is simply taking steps to plan ahead of time to protect what you’ve worked so hard for all your life.
So, what do we mean by “assets”? Assets are really whatever you OWN. This could be your house, your savings accounts, your investments, IRAs, farmland, personal property, your grandpa’s fishing cabin that’s now in your name – it is simply whatever you posses – no matter how much or how little that may be!
And the important thing to know is that you can take important steps to protect those things you or your family have worked so hard for! This is asset protection.
What kind of risks should I protect against?
We all know how unpredictable life can be. Sometimes, it’s full of curve balls you never see coming. So, what are some of the risks that you should protect against? We see six big categories:
- Catastrophic medical bills or healthcare costs (including nursing home care, in-home care or assisted living expenses)
- Scams or mismanagement
- Accidents or mistakes – for example, a car accident
- Acts of God – fire, tornado, hail or wind damage
- Poor financial decisions (adult children or their spouses with wild spending habits, gambling or addictions)
- Risky relationships (adult children where there is likelihood for divorce and/or abusive or controlling relationships)
Now that you know what asset protection is and what types of situations may call for it, let’s look at specific times during the lifespan and what they have to do with asset protection. Read about three real-life examples of asset protection here.
3 Periods of Life Where You Need Asset Protection
So, what are the timelines you need to consider when it comes to protecting assets?
- When you are healthy and still in control. During this time, there are things you can plan for now that you will not be able to do later. It’s much better for you and your family to be proactive during this time.
- When you are sick and unable to make decisions. Debilitating strokes and dementia are just two common types of illnesses that keep people from making decisions for themselves. When a debilitating illness happens, you need a trusted family member or friend to help make the decisions you would want made.
- After your death. Once you are gone someone else will HAVE to deal with your assets. It may be a spouse or an adult child, but either way, there are things that must be done. It’s better if you’ve planned ahead to make this time easier for them. The hardest thing about this time is that they’ll have to deal with a lot of legal things (and paperwork) WHILE dealing with grief. It’s an incredibly difficult time that is made easier by planning ahead.
Tools for Asset Protection – How Do I Protect My Assets?
There are three categories of tools that we talk about in connection with asset protection:
- Financial tools such as insurance can help protect assets. This is a broad area that includes health insurance, long-term care insurance, disability insurance, homeowners insurance and auto insurance.
- Personal legal tools such as trusts can also help protect assets. Trusts can help protect assets from risks that are unique to you and your situation or risks that your kids may encounter later.
- Business legal tools such as LLCs or corporations can help protect assets like small businesses.
I hope this article has helped you see how relatively simple “asset protection” is, along with how important it is to consider during the planning process. Anytime you see a word pertaining to estate planning that you don’t understand, we encourage you to reach out to us. It is very important to us that the vocabulary of estate planning doesn’t keep you from protecting your family. Keep learning about asset protection with our blog post, “3 Real-Life Examples of Important Asset Protection Planning” or give us a call at 217-703-8330 to schedule an appointment with one of our attorneys.