August 2008 Topic - Protection Planning

01.  About Protection Planning
02.  Different kinds of Trusts
03.  Questions and Answers

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Seventy eight percent of people who are sued never dreamed it would happen to them. Ninety percent of all lawsuits are filed in the United States. That works out to a lawsuit being filed every thirty seconds on average. About seventy thousand civil lawsuits are filed each day. The FBI has reported that quarter million criminals actually earn a living through filing lawsuits and winning. Those are some pretty scary statistics for hard working Americans to deal with. The misconception is that it will only happen to the wealthy. Recent studies have proved otherwise. It has been found that most lawsuits are targeted towards families with incomes under two hundred thousand dollars.

Americans justify not getting an asset protection plan by stating that they will just transfer their assets to someone else if a lawsuit is threatened. This action is actually interpreted as an attempt to defraud a creditor, which is a criminal charge. In most cases the transfer will be reversed and a criminal charge and fine will be filed. Therefore, it is much easier to obtain asset protection prior to actually needing it.

1.About Protection Planning

Most people don't even realize that they can be a target of a lawsuit. The majority of citizens are, yet do not even know it. To begin let me ask a few questions to better help establish who is at risk. Is anyone a homeowner or employed? Is anyone a parent of minor children or legally married? These are just a few things that can put someone at risk. Being a homeowner puts someone at high risk for a lawsuit. Homes are very valuable assets and easily accessible.

Public records can inform someone very quickly as to how much it is worth. In some states it is legal to garnish wages, therefore being employed will put one at risk. Being married will also make one an easy target since the spouse is liable for the other spouses debt and liabilities. Remember, parents are usually 100% accountable for minor children. If one feels that these scenarios describe their lifestyle please read on through this newsletter to find out how to protect yourself before it is too late.

Asset protection is the planning to protect your valuables from lenders or judgments. The planning will involve legal steps that can stop a lawsuit and protect your assets from being taken after a judgment has been enforced. Pursuing a plan will make it more difficult for the party suing you to get a satisfactory verdict therefore they will most likely be willing to settle on your debt. The objective of the plan is to avoid creditors from even pursuing you since it will be very costly and complicated for your assets to be seized. With all the different routes available, it is imperative that you research all options and speak to a qualified professional to determine what is right for your situation.

Self-employed and business owners have a thirty five percent chance of getting sued. The best example available is the medical field. Next time you go to the doctors office look at all the papers and disclosures that you must sign before you even make it in to see the doctor, no less have a procedure done. A large number of doctors have stopped carrying malpractice insurance since the fees have become so high. The purpose of some of these papers is to disclose that to the patients. Most of these doctors have their assets protected so that if you do choose to sue there is not too much to go after. This is the goal that everyone should try to establish for him or herself.

Asset protection not only helps you deter lawsuits it also keeps assets out of the view of the public eye. The longer the plan is in place the better it is. With an asset plan the executor will still have control of all assets, however do not have the risk that it can be taken away. There are many different routes available to the public for asset protection. Start by protecting assets on a daily basis. To begin make sure that assets and businesses are minimally exposed. Businesses are an asset and prying criminals will take any opportunity to strip the owner of that.

There are many ways to protect businesses. The most popular is called a Limited Liability Company also referred to as a LLC. This proves to be the most flexible of all corporations due to the fact that you avoid tax problems and expenses with the LLC. Personal assets are protected with this title. In most states doctors and other licensed professionals are not able to obtain a LLC. Therefore, in order to protect their assets an alternative route is taken. Family Limited Partnership (FLP) will protect assets since it is like a trust account. This will not protect someone from being sued, however the defendant is not going to be held responsible for corporate obligations.

FLP gives the option to shift income to lower bracket family members. Many people gift some of the income to children or grandchildren in this partnership. A huge benefit of this is the estate taxes will be decreased. Any money transferred as a gift to the family member will not be included in the estate for tax purposes. If at all possible always try to avoid business partnerships. As partners both are financially responsible for any debts and negligent acts caused. It is very important to carry different entities. The objective is to keep each separate business from liabilities caused by other events. This advice is for all aspects of life. For instance, a home owner to more than one home may want to use a different entity for each one. Therefore, if one property goes into a lawsuit the other real estate is not in any danger.

2. Different kinds of Trusts

==>  Revocable living trust: This is used for basic estate planning. Assets pass to family members listed in the trust. This trust allows for no delay in receiving the assets and no probate fees.

==>  Limited term trust: Property can be put in this trust for a certain amount of years. This trust may be used to support the needs of loved ones from the income or principal. The assets are protected from claims and property can be given back at a later time in life when needed.

==>  Life Insurance Trust: The objective of insurance is to provide funds for living expenses without having to touch savings or retirement accounts. Without this trust estate taxes can be upwards of 55% on insurance proceeds. Another advantage of this policy is that cash is being built free of income tax and the money is protected from any claims.

==>  Estate Freeze Trust: This trust is used for big investments. Often time's real estate, or stocks are used in this trust. The goal of this account is to avoid extensive taxation.

==>  Personal Residence Trust: This trust was set up to protect homes while still receiving the tax benefits of home ownership.

==>  Privacy Trust: Privacy is very important to numerous people. Many people are able to locate real estate and banking information in minutes on anyone. However, with this trust it would be nearly impossible. This allows someone to bank and have other accounts without revealing ownership.

==>  Offshore or Asset Protection Trust (APT): This allows someone to move assets into an overseas trust account. The asset protection and bank secrecy laws go into effect.

3. Questions and Answers

How do I learn more about Protection Planning?
There is a lot of general information about it on the Internet. However, be sure to speak to an attorney before making any decisions. The professional will be able to look at your situation and point you in the correct direction.

I never really heard about Asset Protection is it something new?
It has been around for many years, however with the increase in lawsuits, in the past 15 to 20 years, it has become more popular.

I often see advertisements for asset protection planning from "consultants". Are they qualified?
It is recommended that an attorney should only prepare A Protection Plan. It requires a lot of areas of law including taxation, litigation and many other aspects. Attorneys know the legal area better than a consultant. Also attorneys are responsible for representing you to the best of their knowledge. If they mislead you and your assets do get garnished they are held liable.

Is there any way to protect my IRA?
Yes the best way to protect your IRA is through an International LLC. It is very important to protect your retirement. Speak with a qualified individual about your options.

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Got a question? Then contact our Education Team on 561-883-2398 Ex.310 United conducts regular seminars on financial education, including "How to Budget", come along and join us. To reserve your seat contact our Education Team on 561-883-2398 Ex.310

Newsletter 08
Rev.1
August, 2008