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What do asset protection plans protect assets from, exactly?

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What do asset protection plans protect assets from, exactly?

Estate planning can be a very complicated process. Some people simply want to draft a will naming immediate family members as beneficiaries. Others want to ensure their safety later in life and leave a more thorough legacy after their passing.

Those who fall into the second category often include asset protection planning in the estate planning process. Asset protection planning involves identifying valuable resources that could be vulnerable in the future and then taking specific steps, like the creation of a trust, to protect those assets.

What types of issues can asset protection plans help people avoid?

Personal lawsuits

There are many reasons why a person might face a lawsuit. Perhaps they were in a car crash, and the other party involved blames them. The other driver claims to have major injuries and demands additional compensation beyond what insurance pays. They may try suing a person and coming after their personal property.

Creditors can also file lawsuits. People who lose their jobs and those living on fixed incomes after retirement could fall behind on their financial obligations. Creditors might take legal actions seeking to place liens against their property to compel repayment. Asset protection plans help people ensure that their most valuable resources aren’t at risk if they face a lawsuit in the future.

Estate taxes

Asset protection plans also often prioritize protecting an individual’s beneficiaries from the losses likely if the estate must cover estate taxes. Estate taxes can consume a significant portion of the assets in an estate. Those taxes usually take precedence over the rights of beneficiaries to inherit from the estate. Asset protection planning limits what assets are part of the estate and can limit or even eliminate the risk of estate taxes.

Creditor claims in probate court

When an individual dies, their creditors can make claims in probate court seeking full payment from the estate. If the decedent required Medicaid benefits later in life, the Medicaid estate recovery program could also request reimbursement from the estate. As is the case with the state taxes, debts are a higher priority during probate proceedings than inheritance rights. Asset protection plans can help preserve resources for beneficiaries after an individual dies.

Identifying valuable property and creating a viable asset protection plan to preserve that property can be as important as drafting a basic will. People who understand how their financial security and legacy could be vulnerable may plan ahead of time to protect themselves and their loved ones from financial hardship in the future.

Contact our firm today to learn more about how our
New Haven County estate planning lawyers can help you.

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