News & Resources: Blog

Asset Preservation: Plan to Protect

Published: April 21, 2021

As one gets closer to the twilight years in life, they begin to ponder their legacy and what they are leaving behind for their beloved family members. While in the past the idea of asset preservation was considered strictly for those with immense wealth, today it is recognized that everyone should have a plan for the latter stages of life and after their death. After a lifetime of hard work, saving, and making sound investments, people want to be ensured that all financial assets remain safe and secure, available for themselves and their families. Only with a thorough and strategic plan can the elderly feel a sense of security that their hard-earned assets will be protected for their descendants. In this blog, we describe asset preservation and how an elder law attorney can help develop a strategic plan for you and your family.

What is Asset Preservation?

Asset preservation is a proactive legal action that protects your assets from future claims, lawsuits, divorces, creditors, and judgments. Asset preservation planning also helps in avoiding impoverishment caused by the escalating cost of nursing home and long-term care services and provides a means for seniors and persons with disabilities to provide a legacy to their families. The unfortunate reality is that in this day and age, anyone can be sued. Lawsuits can occur for a variety of reasons, whether it’s due to motor vehicle accidents, credit card debt, bank foreclosures, or professional liability. If someone wins a monetary judgment against you, your personal assets will be vulnerable unless you do something to protect them in advance of the liability event.

Why You Do Need It?

We all have different careers, different goals for our families, and different ways in which we like to save and spend our assets. For this very reason, the asset protection plan that is best for you should be customized with the assistance of a knowledgeable and experienced elder law attorney. Legal assistance can be crucial in preserving and protecting assets included in your will and intended for your heirs and beneficiaries. Upon death, your estate will be settled, which means that the debts of the estate will be paid from the assets in the estate. If legal judgments against you or significant medical costs remain unpaid, the probate court may require your assets, including real estate intended for family members or other beneficiaries, to be sold to settle these debts. Asset protection planning does not work after you are sued. This means you must be proactive and have this planning completed prior to being sued.

At Scott Bloom Law, we are a team of advocates who care, always fighting for what’s best for our clients and their families. With knowledge, experience, and compassion, we strive to find solutions that make the aging process as emotionally and financially easy as possible. Visit us at scottbloomlaw.com or call 215-364-1111, to talk to find out more.

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It is important to plan your estate to ensure that your assets, interests, and those you love will be protected after your death. However, without proper guidance and advice from a qualified estate planning attorney, many individuals make costly mistakes. Beyond undermining your intent and diminishing your financial legacy, poor planning can create additional stress to your heirs in their time of grief.

Six common errors frequently happen during the estate planning process. These mistakes often occur because the complete financial picture was not fully considered. It is easiest to avoid estate planning mishaps by knowing what they are before you begin or looking for these errors when reviewing and updating your plan.

Financial procrastination causes problems. While examining your mortality and making end-of-life preparations is not a particularly fun activity, try viewing it as helping and enhancing your loved ones' future lives while creating a sense of peace during your own.

The need to protect your finances using wills, trusts, and power of attorney (POA) documents is not solely the domain of the elderly. Putting off the drafting of legal documents necessary to protect yourself and your inheritors can lead to disastrous outcomes.

By far, failing to create an estate plan is the most common mistake. Even if you do not have a lot of money, you need a will to protect any minor children you have by naming their guardians. Your will also ensures your asset distribution to heirs is carried out according to your intentions when you die and names a representative to handle debt obligations, final taxes, and other estate administrative duties. Dying without a will or "intestate" can lead to dire consequences.

Outdated wills, forms, and POAs create problems. If you made a will twenty years ago and have not reviewed and updated its contents, chances are many of the details no longer reflect current assets or beneficiaries. Estate planning is not a "set it and forget it" proposition. Reviewing estate planning documents and beneficiary forms every two years is generally adequate, barring a major life change such as divorce, birth, death, remarriage, or relocation to another state.

Beneficiaries without coordination can create expensive oversight. Beneficiary forms for retirement accounts like 401(k)s and IRAs, annuities, and life insurance policies may constitute a significant portion of your estate's assets. These beneficiary forms are legally binding and will supersede the contents of your will. Failure to update beneficiary forms can lead to an ex-spouse receiving assets that preferably would go to your heirs. Routine checks of all beneficiary designations are best practices for estate planning.

Failing to title trust assets properly can lead to probate. While not everyone requires a trust, those who do must carefully retitle their assets into the name of the trust. Forgetting to add more recently purchased property or opening a new account requires you to title them into the trust to receive trust benefits. Whether real estate, cash, mutual funds, or stocks, if you fail to move the asset into the trust, they become subject to the probate court, possible tax consequences (depending on the trust type), and a public record of these assets.

Life insurance can trigger estate tax. Life insurance can provide heirs with liquidity without the sale of assets and tax consequences when handled correctly. However, if a wealthy individual dies while maintaining ownership of their life insurance policy, they may inadvertently create a tax event for their heirs. Although life insurance death benefits are not subject to state or federal income taxes, any "incident" of ownership by the decedent can create an inheritance tax.

An estate planning attorney can help shelter life insurance proceeds from high-value estates by gifting the policy to an Irrevocable Life Insurance Trust (ILIT) or draft a new trust to purchase a new policy where the trust is the owner and beneficiary. A policy owned by the trust does not create a taxable situation to death benefits. Your attorney's careful structuring of this trust type is complex but can provide proper protection.

Joint ownership of assets with your children can lead to disastrous consequences. Naming your children as co-owners of assets, even digital, permits their creditors to access your money. The better way to address the situation is to give your adult child power of attorney and assign them as a beneficiary to a payable on death bank or brokerage account. This tactic permits them to access your funds if required during your lifetime. However, it keeps your assets from your child's estate and away from their potential creditors.

Ultimately the biggest error you can make is not finding the right estate planning attorney to guide you. This specialized attorney receives training on avoiding probate, tax implications, and asset protection if you require long-term care. Proper planning with the right guidance will help you avoid costly estate planning mistakes and protect your family's future financial well-being.

If you have questions or would like to discuss your legal matters, please do not hesitate to contact our office at 215-364-1111 to schedule a consultation.

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