Asset Protection ~ Facts & Fiction
Recently, I read a column that suggested asset protection strategies should be used by those with modest estates. While I appreciate the premise, I respectfully disagree. Asset protection strategies used by high-net worth or ultra-high net worth individuals require a substantial investment in resources – specifically time and money. Most families with modest estates don’t have $2-5 million in liquid assets, a mortgage free million dollar primary residence, a second vacation home, watercraft, and insurance to cover the value of all of these assets. Let’s be real, if: (1) Your family residence is still subject to a mortgage, you don’t actually own the asset to protect. (2) You own 1 or 2 multifamily income producing properties that are still subject to mortgage, you don’t actually own the asset to protect. You do, however, own the income, which is what umbrella insurance and LLCs are for. (3) You don’t have the funds readily available to replace your mortgage-free family home, the only way to protect that asset is with a robust homeowners insurance policy. Economic uncertainty is frightening. And ways exist for families with modest estates to protect what they have and undergird their wealth accumulation efforts. However, if you’re thinking about asset protection consider the above and think again: AFFORDABILITY. The legal fees alone are generally $10,000 or more, and they generally do not end because asset protection or wealth preservation is not a “set it and forget it” endeavor. CURRENT JURISDICTION. All states (or jurisdictions) don’t allow you to establish an asset protection plan or recognize asset protections trusts. IT TAKES A TEAM. Lawyers, tax professionals, appraisers, insurance professionals, and, even, security professionals depending on your other family members and the size of your estate. Experienced estate planning and wealth preservation professionals will do what they can within legal parameters to set you and your family up for success. But, it’s not like the movies and if a wealth preservation professional snaps their fingers and agrees with everything you say, run…fast…and far.