Asset Protection Planning

Asset protection planning is an important part of your estate plan.  If you’re like most people, you have worked hard your entire life to earn and save your assets.  And, you would like to give a gift to your children during your lifetime or after your death.  Either way, ask your estate planning attorney how to incorporate asset protection planning into your estate planning so that your gift is not taken in a divorce.

More than half of us get divorced. It’s part of our way of life and therefore must be part of our asset protection planning and estate planning.  You can protect your gift to your child by giving the gift in a trust, instead of outright.  Picture a trust like a lock box.  Your child is the only one with the secret combination to the lock box.  She still has full access to the monies for her own benefit (and that of her children, if you’d like), but if she gets divorced… your gift cannot be taken in a divorce property settlement.

If you forgo asset protection planning and give the money to your child in her individual name, your gift may be taken from her and given to her ex-husband.  Instead of giving your gift in a lock box, it’s like just tossing a pile of cash at her in hopes that she’ll be able to catch it in the middle of a wind storm.

By including asset protection planning in your own estate planning, you can give a gift to your child that you cannot give to yourself.  If your child gets divorced or suffers bankruptcy, business failure, medical emergencies or is sued, your gift is protected and will be used only for your child’s benefit.

It is in your best interest and the best interests of your children to include asset protection in your estate plan.  Consult with an estate planning attorney to ask how.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

A divorce, whether acrimonious or amicable, is an emotionally and, oftentimes, financially devastating life event.

A Separation Agreement or final Decree of Divorce stipulates division of assets, child custody, visitation and support and alimony payments. However, there are other things you need to do to prevent your ex-spouse creating further financial difficulties or receiving assets if you die.

If you have minor children, a Last Will and Testament or a Living Trust is essential. These legal documents permit you to appoint a Guardian to raise your children and a Trustee to distribute your estate. If you do not have a valid Will or Living Trust, your ex-spouse (or someone else you do not want) may receive custody of your children and acquire your assets.

A Health Care Power of Attorney may be another critical document. A Health Care Power of Attorney allows a person of your choosing to make decisions on your behalf should you become incapacitated and unable to form your own decisions.

Numerous other details, which may seem trivial, must be looked after; otherwise, the consequences may not be quite so minor. If you and your ex-spouse have joint bank or investment accounts, these must be put into your name only or he or she can withdraw money or automatically receive the proceeds should you die.

Life insurance policies, pension plans, 401k plans or any type of asset that has trustee and/or beneficiary designations need to be reviewed and your ex-spouse’s name replaced, if necessary. If you want your children to be beneficiaries, you can appoint a trustee to manage the assets until they reach the age of majority.

Be aware a Last Will and Testament is not legally binding on beneficiary designations and accounts with joint names. This means, you must change the beneficiary clauses and accounts to ensure your ex-spouse has no entitlement to these assets.

An ex-spouse can run up expenses on credit cards and utility accounts held in joint names and you are equally responsible for his or her debts. Cancel or delete his or her name from these accounts immediately to protect yourself.

If you need legal advice about estate planning after a divorce, please contact us. One of our knowledgeable estate planning attorneys will assist you.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.

Divorce is one of the most painful, disruptive life experiences you can have. Given the emotional stress and turmoil that goes along with many divorces, dealing with financial details may be the last thing you want to tackle. Paying attention to the details, however, can mean the difference between making a new start and having your past haunt you far into your future.

Besides finding a good divorce attorney, you’ll also want to enlist the help of a financial advisor and estate planning attorney. These professionals may be able to see your situation more clearly than you can, and they’ll help you to look out for your own interests. They also will have enough experience to warn you of pitfalls you might not even know you’ll be facing.

Next, you’ll want to take stock of your financial situation. It’s important to know what you and your spouse are working with, so that you can reach a fair and equitable division of your assets and debts. This is especially important for you to do if you have not been the one in charge of the money during your marriage. Find out exactly what property you each own, including retirement accounts and investments. Also find out what you owe – including mortgage debt, credit card debt, and loan balances. To help with this, you can request copies of your credit report from all three credit reporting agencies. These reports will list your accounts and the payment history for each.

Once you know what your financial picture looks like, it’s time to start separating your accounts (after consulting with your attorney, of course). You’ll want to close joint checking and savings accounts, and you and your spouse will want to open individual accounts. The same is true for any joint credit accounts – close your joint accounts and decide what to do with your joint debt. You may even want to consider transferring existing debt to your new account and paying it off yourself. This is because missed or late payments on a joint account will hurt the credit of both account holders, regardless of who is responsible for making the payments.

You’ll want to consider the tax implications of your financial decisions – selling property or investments can result in capital gains or losses, and moving money from one retirement account to another can also trigger tax consequences. You’ll want to work with your attorney and/or your financial planner to make sure you don’t end up with unintended tax bills.

Once the divorce is final, check your credit reports once more to make sure that the actions you took as part of the divorce were accurately reported. You may want to meet with a financial advisor to make a plan for your new, individual financial goals. If you take precautions to protect your finances during your divorce, you should have a solid foundation to build on.

Frank & Kraft, Attorneys at Law is a member of the American Academy of Estate Planning Attorneys.