What Is an Asset Protection Plan and How to Create One

The heart of estate planning is about providing for the people, organizations, and causes that you care about even after you are gone. However, in some cases, a will is not enough to accomplish this. If you want to pass on specific assets or retain control over how they are managed, you may also need to develop an asset protection plan. 

These plans can be invaluable for ensuring beloved properties, businesses, or heirlooms are protected from estate taxes and mismanagement. Below, we discuss what asset protection plans are and the steps involved in creating a plan that will fit your unique circumstances. 

What Are Asset Protection Plans?

An asset protection plan is a collection of documents, legal entities, and strategies for transferring assets safely from one generation to the next while minimizing the tax burden on the recipients. These plans can be quite complex, especially for high-net-worth individuals. However, they are often worth the effort to develop because they can save your heirs thousands or even millions of dollars in inheritance taxes, depending on your estate. 

Trusts are the most common tools used in these plans. There are a wide variety of trusts that can be used to protect different types of assets, including:

  • Joint marital trusts to protect your assets from taxes until your spouse passes.
  • Beneficiary-controlled trusts to allow your heirs to manage the assets you gift to them.
  • Retirement trusts to maximize the benefits of IRAs and other retirement accounts. 

While developing your asset plan, you will work to determine the best combination of trusts and other tactics to protect your assets effectively. 

Four Steps to Create an Asset Protection Plan for Your Estate

Creating an asset protection plan is best done with the assistance of a proven estate planning attorney in San Jose. They will counsel you on the best tactics for your specific circumstances and draft the documents for you when you are ready to finalize the plan. With your attorney, you will proceed through the following four steps:

1. Identify What Assets You Want to Protect

Not every asset you own needs to be protected the same way. Asset protection plans are typically reserved for high-value items that you want to pass on to your heirs after your death. For example, homes, vacation properties, valuable heirlooms, and retirement accounts are included in most asset protection plans. Items like most vehicles, furniture, and things with significant emotional value but little resale value are not. Talk to your attorney to determine what assets would be best to include in your plan to make sure you do not leave anything out by accident.

2. Determine the Right Protection Strategies for Your Property

Once you know what property you must protect, your attorney will help you determine the correct strategies and tools. If you have a large estate or you have multiple classes of heirs to whom you will be distributing property, you may implement two or more trusts to accomplish your goals. Your lawyer may also advise you to distribute certain assets during your lifetime to minimize taxes. 

3. Develop Plans and Schedules for Distributing Assets

After you have determined the tools that will best protect your property, your attorney will assist you with drafting the documents to create and inform these legal entities. You will name trustees for each trust, provide the terms and conditions for the trusts, and develop schedules and instructions for how funds or property should be disbursed. Finally, your attorney will instruct you on how to handle your property in the future now that it is protected. 

Consult Proven Estate Planning Attorneys to Protect Your Assets

Don’t delay the process of protecting your property. If you understand the importance of a will for your heirs, you may also benefit from developing a California asset protection plan. You can discuss your needs with the accomplished estate planning attorneys at The Dayton Law Firm, P.C. We have decades of experience working with clients to develop comprehensive estate plans to guard their interests and assets. Learn more by calling 408-758-5750 or emailing us today.