Asset Protection Planning
If you have made an effort to save money and invest wisely, then you have probably built up some assets for your retirement and, eventually, for your family. The last thing you want is to lose your nest egg to creditors, taxes, a lawsuit or a former spouse or business partner. Through asset protection techniques, we can help you limit other people’s and institutions’ access to certain assets you and your estate own.
Asset protection is effective and useful for individuals who own property or accounts of any value, not just the wealthy. Asset protection also needs to begin now. Asset protection only protects you from future, not current, creditors and claimants.
Threats to your assets can come from a variety of potential predators. The experienced asset protection attorneys of Brady Cobin Law Group LLC in Raleigh, N.C., can help you implement strategies to protect your assets before circumstances saddle you with financial liability and someone initiates a claim. Contact us to set up a review and consultation today.
Why Hire a Property Protection Attorney?
Asset protection is a means of putting money and other valuables out of the reach of creditors or legal judgments without resorting to illegal acts like concealment, contempt of court, tax evasion or fraud.
“Judgment creditors,” any persons or institutions entitled to use the judicial process to collect a debt from you, focus on seizing real estate, deposit accounts, paychecks, stocks and bonds, and may even attach property or money that you expect to acquire in the future.
An individual may find everything they have worked to build and save suddenly targeted by such claims as:
- Credit default. Circumstances could cause you to fall into arrears on a loan or mortgage, leaving you vulnerable to seizure. If the debt is secured (you put up collateral), the creditor can seize the property without going to court. If the debt is unsecured, the creditor must go to court and get a judgment before seizing property.
- Personal injury lawsuit. A person who falls while on your property or someone you hit in a car accident may sue you for damages that exceed what your auto liability or homeowner’s insurance covers.
- Separation and divorce. When a married couple splits, North Carolina law regarding the division of marital property dictates how assets acquired during the marriage must be divided.
- Business dispute. In certain professions, you can be subjected to malpractice claims, which may result in a judgment that exceeds your insurance and results in efforts to seize your assets. More common is a business partnership that has gone bad and a lawsuit that claims bad faith or other misconduct on your part and results in a judgment against you.
- Bankruptcy. A bankruptcy declaration is an appropriate legal maneuver in the face of insurmountable debt. However, Chapter 7 bankruptcy, the most common approach for individuals, requires liquidation of assets that are not legally exempted.
- Inheritance or estate taxes. The federal estate and gift tax as currently structured primarily affects families with significant wealth, but rates are as high as 40 percent.
Except for taxes, each of these circumstances is typically unforeseen, yet they are not at all uncommon. And once a claim has been filed, sudden asset sales or transfers neither please nor escape the reach of the courts.
However, in each circumstance, real estate, personal property, financial accounts and money owed to you can be protected and remain yours if you have made arrangements ahead of time.
Common Property Protection Strategies in North Carolina
A knowledgeable asset protection attorney at Brady Cobin Law Group, PLLC can meet with you to discuss your goals, review your finances and suggest asset protection strategies that meet your needs.
Among the tools we often used are:
- Insurance. Maintaining a proper level of insurance coverage is a good first step. A personal umbrella liability policy would provide money for injuries, property damage and any other situation for which you may be judged liable for another party’s “damages,” or compensable losses. Coverage should be equal to your net worth at least.
- Tenancy by the entirety. This is joint ownership of a real estate by a married couple. When it is in place, a creditor must have claims against both owners to make a claim against the property. When one spouse has exposure through a profession or business, a home or other real estate they hold as “tenants by the entirety” is protected. In North Carolina, tenancy by the entirety is generally automatic when a married couple buys the property together – unless the deed states otherwise.
- Retirement accounts. Qualified retirement plans — such as 401(k) accounts, IRAs and Roth IRAs, tax-sheltered annuities, deferred-compensation plans and many pension and profit-sharing plans — are automatically protected from creditors under North Carolina law as well as the Employee Retirement Income Security Act.
- College savings accounts. North Carolina protects 529 college savings plans from creditors and in bankruptcy up to $25,000. Contributions made within one year of filing for bankruptcy are not protected unless they are consistent with previous regularly made contributions. Also, the account must be for a child and actually used for the child’s education, though money left after a child completes their education may be rolled over for additional children, grandchildren or the account owner’s use.
- Homes and burial plots. North Carolina’s “homestead exemption” puts up to $35,000 of the value of your home or the home of a dependent child, or a burial plot beyond creditors’ reach. For an unmarried person over 65 years old, the protection rises to $60,000 of the value of a home or burial plot.
- Business protection. If you own a small business, such as a sole proprietorship, you need to ensure that claims against the business are separate from your personal assets. Registering as a limited liability company (LLC) or corporation limits claims arising from business activities to assets owned by the business itself. Conversely, personal claims against you will not affect business assets.
- Family limited partnership. A limited partnership is a legal entity that has one or more general partners, who control its assets, and one or more limited partners. Designation as a family limited partnership (FLP) simply means that the owners are related. An FLP allows you to transfer ownership of real estate or other assets to family members while still maintaining control and saving on taxes. Meanwhile, assets of the FLP are protected from personal claims against limited partners and, if set up correctly, general partners, as well.
- Gifts. Creditors cannot satisfy your debts by taking assets you do not own. You can put property or accounts in someone else’s name, such as a parent’s or grown child’s, to protect them from your creditors. However, you must understand that once the property has been transferred you have no legal control over it.
What is an Asset Protection Trust?
One favored approach to managing assets for heirs is to create a revocable trust. Typically, you would name yourself and your spouse as trustees so that either of you could control the money and property in the trust. Additionally, you would name an alternate trustee to take over the trust when you and your spouse die, therefore ensuring that assets in the trust transfer to the beneficiary without entering into probate.
However, revocable trusts are not protected from creditors and other legal claims. For asset protection, you would have to establish an irrevocable trust, which puts assets within it permanently out of your control – legally, at least.
Like making a gift, establishing an irrevocable trust and putting assets into it makes the trust the owner and, thus, puts those assets beyond the reach of your creditors, lawsuits, a divorcing spouse, etc. However, the trust must have a trustee who is not you, and they control the trust and its assets. But, bylaws of the trust can be written so that the trust’s assets are used to your benefit.
Protection from Partnerships and Joint Accounts
It is important to look at assets that may also be controlled by other people, such as business partners or those attached to jointly held accounts. Because they have full rights to assets in these accounts, just as you do, these assets are exposed to their creditors, lawsuit judgments, separation agreements, etc.
It is wise to consider whether a business partnership can be converted to an LLC or FLP, as discussed above, or another entity that offers some level of asset protection. If having a joint account is unavoidable, such as for a grown child who regularly needs assistance, it is best to maintain the minimum account balance necessary to accomplish the goals of the fund.
Contact Our Raleigh Asset Protection Lawyers
It’s important to make sure the financial security you have worked for is in place for you and your family when life’s inevitable needs or surprises arise. The asset protection attorneys of the Brady Cobin Law Group in Raleigh can help you put your savings and income beyond the reach of creditors, litigants, taxes and others who would take it for themselves.
Remember, your assets must be protected before they are targeted by legal claims. Our law firm has decades of experience in estate planning, estate administration, estate litigation, and elder law in North Carolina. The sooner you take the steps necessary to protect and ensure your family’s future, the better off you’ll be. Contact our asset protection attorney today.
Had an absolutely phenomenal experience with Andrew and Elizabeth. I had a bit of an urgent matter that needed to be addressed. Never in my life have I seen a law firm work so swiftly and diligently to ensure I got what I needed in a timely fashion. I would absolutely recommend them to anyone looking for the services they offer.