Wealth preservation is an essential component of estate and wealth management planning for anyone looking to pass on their assets to future generations. Unfortunately, growing wealth also means becoming more vulnerable to lawsuits and creditors eager to capitalize on hard-earned finances. While many people fear a volatile stock market or bad investment decisions could lead to the loss of significant assets, safeguarding your wealth is equally important. To achieve this goal, wealth solution firms, such as Ora Partners Limited, UBS, and Fidelity Investments, offer support to ensure the proper management of assets and minimize the risk of financial loss due to lawsuits or creditors.
As you go through the estate planning process, the following strategies can help ensure that your wealth isn’t compromised during your lifetime.
Retitling Assets
Retitling your assets can protect them from being seized in the event you become the subject of a lawsuit. While it may not be practical or possible to retitle all your assets, certain properties, such as a home, can be protected by removing your name from public records.
If you’re married, one strategy you can use in some states is titling your assets as tenants-by-the-entirety with your spouse. Under this type of ownership, the surviving spouse automatically becomes the sole owner of the asset when the other spouse dies. Moreover, assets owned by tenants-by-the-entirety are often exempt from creditors if a judgment is made against one spouse for their sole liabilities or debts. In many cases, assets owned in retirement plans and IRAs may also be protected.
Limited Liability Entities
Creating a limited liability entity is a practical way to separate your assets from those of your business or other income streams, such as a rental property. One of the advantages of doing so is that your liability for activity within the entity is limited to the assets of the entity. On the other hand, if you fail to set up a limited liability entity, a legal dispute brought against your business could cost you everything, as creditors may be able to seize your personal and business assets.
Irrevocable Trusts
Once you transfer assets to an irrevocable trust, the trust becomes the asset owner, and you can no longer control how those assets are managed. Because the trust owns the assets, creditors cannot seize them to satisfy a judgment, even if you are the beneficiary of the trust. However, assets that have been distributed to beneficiaries of the trust will be subject to claims.
Asset Protection Trusts
An asset protection trust can be held offshore. It is an irrevocable trust and is one of the best tools available to protect your wealth against creditors. While the trust may allow for periodic or occasional distributions, these distributions can only occur at the discretion of the trustee. Seek the help of a seasoned financial advisor or wealth solutions firm to navigate the intricacies of this process.
Your assets can be compromised for numerous reasons outside your control, which is why wealth preservation strategies are a key component of your estate plan and overall wealth management plan. Whichever strategy you choose to employ, it’s important to implement it before any legal action is brought against you and your business, as doing so after the fact may present more challenges.