Asset-Protection Basics

Article provided by WealthCounsel; Reviewed & edited by James W. Garrett, Esq.

Most of us do not expect to be sued.  However, lawsuits are filed every day.  If your financial and estate planning doesn’t include adequate asset protection, you could end up losing a substantial amount of your wealth in the event of a claim – even a “frivolous” one.

It’s well worth reviewing your plan to see if it utilizes any asset-protection strategies.  Shielding your assets and property against legal claims takes sophisticated planning and teamwork. We’re here to help you and your other professional advisors develop a tailored asset-protection strategy.

Here are a few strategies you may want to consider.

  • Tenants by the Entirety (TBE): If you are married and jointly own assets with your spouse, you should consider having them retitled as “Tenants by the Entirety” (TBE).  TBE is a type of joint ownership that only married co-owners can enjoy.  Under Virginia law, an asset titled TBE is protected from a creditor, provided that only one spouse is liable.  But, to have this protection, the jointly owned asset must be titled as TBE and not simply as “joint tenants.”  To make this change, you will need to complete a new account form with your financial institution.
  • Domestic Self-Settled Asset Protection Trust (DAPT): DAPTs can protect you from a legal claim that may arise in the future, by allowing you to place your assets in a special trust that protects them from the reach of a creditor.  Although DAPTs aren’t available in every state, they are available in Virginia.  DAPTs are a sophisticated planning tool that’s not right for everyone.  But, in the right situation – someone with lots of assets or in a high-risk occupation – DAPTs can provide powerful asset protection.
  • Lifetime Trusts: Lifetime trusts can be used to protect your children’s inheritance.  Think of this tactic as asset protection for the next generation.  Although this type of planning does not provide any asset- protection benefit for you, a lifetime trust can secure the financial well-being of your children and grandchildren after you’re gone.
  • Retirement Plans: Did you know that the funds you put away in retirement plans are asset protected from your creditors and bankruptcy?  Do you know that inherited retirement plans lose those protections when you leave them to your children and grandchildren?  This is what the U. S. Supreme Court ruled in the 2014 case, Rameker v. Clark.  Our firm has helped many clients establish special stand-alone Retirement Plan Trusts designed to give inherited retirement plans income tax deferral and asset protection.  If you have sizable retirement plan assets, you ought to look into this type of planning.
  • Protecting Investment Real Estate: If you own several rental properties, you ought to consider insulating this liability from the rest of your assets by holding those rental properties in a separate business entity.  In the past, a limited liability company (LLC) was the entity-of-choice for asset-protection purposes.  Today, many of our clients instead use a different form of business entity called a Virginia Business Trust.  If you haven’t heard of a Virginia Business Trust, we’d be delighted to meet with you to tell you more about it.

Asset-protection planning should not be delayed or neglected.  Effective strategies like these only protect your assets when they’re put into place well ahead of a lawsuit, creditor claim, or bankruptcy.  This means that you must put asset-protection planning in place before you need it!  Think of it like another form of insurance.

We’re here to help you.  It’s all about peace of mind.  Give us – the attorneys at Carrell Blanton Ferris & Associates – a call today to make an appointment to discuss your asset protection and estate planning needs and concerns.  We’re confident you’ll be delighted with the education and counsel you’ll receive.