Estate Planning May Include Strategies for Asset Protection, Says Estate Planning Attorney Andrew H. Hook
Virginia Beach, VA (Law Firm Newswire) May 16, 2016 – Estate planning clients often ask about the most effective methods of protecting assets from creditors. It is always best to transfer assets prior to the time at which any claims arise. It is too late to make any transfers after there is a creditor issue. If such a transfer is made, it will be considered a fraudulent transfer.
Other factors to consider are the following. If the grantor makes a gift to keep an asset from current creditors, but the grantor maintains control over the gift, then the gift may be deemed a fraudulent transfer. If the grantor makes a gift that causes the grantor to be insolvent, then the gift may be deemed a fraudulent transfer. In addition, a transfer to an asset protection trust that was created offshore or in the United States might be ineffectual if there is the possibility of a claim.
“Individuals need to be aware of the most efficient means of protecting their assets so that they are not subject to the claims of creditors. A consultation with legal counsel can help make certain that they employ strategies to protect their assets,” said Andrew H. Hook, a prominent Virginia estate planning attorney with Hook Law Center with offices in Virginia Beach and northern Suffolk.
One asset protection strategy is to form a business using a limited liability entity instead of a sole proprietorship. Among the choices of entity are a corporation, a limited partnership and a limited liability company. However, regardless of the kind of entity used, a limited liability entity will not offer liability protection if the corporate formalities are not followed. For instance, contracts should be in the name of the entity, there should be separate bank accounts for the entity, and personal funds and entity funds should not be commingled. Furthermore, there should be sufficient insurance coverage.
For individuals, the most effective asset protection strategy is to hold property jointly with a spouse. This kind of ownership is called tenancy by the entirety. Property held in this manner is usually protected against creditor claims of only one spouse.
However, there may be factors that would discourage couples from holding property jointly. For instance, in a divorce situation, jointly held property is considered marital property. In addition, the property may be incompatible with the estate-planning objective of having adequate property in each spouse’s name to fully use each spouse’s unified credit amounts. Due to the right of survivorship, the first spouse to die may be prevented from having any interest in the property left by will to another individual, such as a child from a previous marriage.
As a last resort, an individual can file for bankruptcy, in which case the debtor will be discharged from most debts.