Asset Protection & High Net-Worth Planning2019-04-08T12:53:40-05:00

Asset Protection & High Net-Worth Planning

The Estep Law Firm has experience designing asset protection strategies for individuals, families, and business owners.  A will or revocable trust provides no asset protection for the trust maker during his or her life. Upon the death of the trust maker, however, or upon the death of the first spouse to die if it is a joint trust, the trust becomes irrevocable as to the deceased trust maker’s property and can provide asset protection for the beneficiaries, with two important caveats. First, the assets must remain in the trust to provide ongoing asset protection. In other words, once the trustee distributes the assets to a beneficiary, those assets are no longer protected and can be attached by that beneficiary’s creditors. If the beneficiary is married, the distributed assets may also be subject to the spouse’s creditor(s), or they may be available to the former spouse upon divorce.

Trusts for the lifetime of the beneficiaries provide prolonged asset protection for the trust assets. Lifetime trusts also permit your financial advisor to continue to invest the trust assets as you instruct, which can help ensure that trust returns are sufficient to meet your planning objectives. The second caveat follows logically from the first: the more rights the beneficiary has with respect to compelling trust distributions, the less asset protection the trust provides. Generally, a creditor ‘steps into the shoes’ of the debtor and can exercise any rights of the debtor. Thus, if a beneficiary has the right to compel a distribution from a trust, so too can a creditor compel a distribution from that trust.

High Net-worth Planning

Recent tax legislation included significant revisions to the estate tax law that will affect High Net-worth Planning for the foreseeable future. These revisions include:

  • The federal gift and estate tax exemption will remain at $5 million per person, adjusted annually for inflation.  This provides individuals the opportunity to transfer large amounts during lifetime or at death remains, and because the amount is tied to inflation, more assets can be transferred each year.
  • The generation-skipping transfer (GST) tax exemption also remains at the same level as the gift and estate tax exemption ($11.2 million for an individual and $22.4 million for a couple in 2018, adjusted for inflation). This tax, which is in addition to the federal estate tax, is imposed on amounts that are transferred (by gift or at death) to grandchildren and others who are more than 37.5 years younger than you; in other words, transfers that ‘skip’ a generation. Having this exemption now be ‘permanent’ allows for planning that will greatly benefit future generations.

High net-worth Individuals and families can now benefit from the recent tax legislation to complete their estate planning.  Through counseling and the proper use of trusts, high net-worth estate planning provides peace of mind by allowing clients to avoid or reduce federal estate taxes; Protect an inheritance from irresponsible spending, a child’s creditors, and from being part of a child’s divorce proceedings; See that control of their assets remains in the hands of a trusted person and create meaningful charitable gifts.

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