Here are some more great questions from some of my students.

Q. I have a home with equity of $400,000. Should this be in a trust?

A. No matter the value of your home, holding it in a trust will let you avoid probate and if you have the correct trust, let you avoid estate taxes. Guaranteed Millionaire will explain this in detail.

Q. I am interested in protecting my dad’s assets from a woman he is not 100% sure of. I would appreciate any information you can give me on transferring the assets into my name (only child) and giving him a life estate.

A. You asked if I had any info on transferring your dad’s assets into your name and giving him a life estate. Yes, you can have your dad transfer the property into your name with a life estate, but you will probably get better tax treatment if you inherit the property, because you will get a step-up in the basis of his property at his death. You may be able to accomplish the same thing by having him form a trust. That way he still “owns” his property, but he can tell his girlfriend it is in trust for you.

Q. I owe $100,000 in credit card debt. How do I protect myself and my wife from having our bank accounts attached or having a lien put on our real estate holdings?

A. You asked how to protect yourself from the $100,000 you owe the bank in credit card debt. Unfortunately the time to protect yourself is before you get in trouble. Property that is transferred in anticipation of bankruptcy or litigation will be brought back by the court using fraudulent conveyance statutes. You remember how the court brought back the property Bernie Madoff transferred? If you have three years before everything caves in, then you will want to get Accumulation and Preservation of Wealth and structure your assets accordingly.

Q. How do I protect an estate from being scammed by probate lawyers?

A. Unfortunately, I know where you are coming from, because I have seen this happen in my own family. In Guaranteed Millionaire, I write about my wife’s uncle who flew his plane into the ground and how the lawyers litigated the estate until the money ran out leaving the children penniless. The best way to avoid that type of lawyer is to avoid probate. Having a trust is not enough. A trust will only avoid probate if it is properly funded and used. Guaranteed Millionaire discusses how to fund your trust.

Q. I want to put all my assets (home, vehicles, etc.) into one entity name where that entity is owned/controlled by myself and my children and thus cannot be divided by death, divorce or otherwise. Thus all assets belong to the entity. How do we do that?

A. Unfortunately, I don’t know why you want to move all your assets, so it is hard to advise you what entity to use. There really isn’t anything that can do what I think you want to do. You will own the entity, whichever one you use, and as one of your assets, it will be subject to all the issues any other property you own is exposed to. You will want to use a trust to avoid probate and probably an LLC to hold assets. I discuss and describe the different entities and how to use them in Accumulation and Preservation of Wealth. (more…)

Did you know that the third week in October is National Estate Planning Awareness Week? It is a good idea because:

• 70% of Americans do not have a basic will – those that have a will fail to keep it updated.
• 79% do not have a living trust
• 69% do not have a living will or advance healthcare directive

Have you completed your estate plan? Is up to date? Why not celebrate National Estate Planning Awareness Week and get it done.

We receive lots of queries from people who are struggling with the important issues of asset protection and estate planning. Periodically, we’ll try to answer some of those questions for everyone to learn from, or at least help you see options that you need to discuss with your own trusted advisors. Here’s the first of several we’ll post on this blog.

Q. We are a small manufacturer, unable to purchase product liability insurance, with full ownership of house and property. If I create a trust and make our daughter the trustee, is this a viable form of asset protection?

A. Having your own business is risky and without the ability to purchase liability insurance, your home and other property may be at risk. You should certainly operate your business as a corporation or limited liability company (LLC). If the entity is properly maintained, it should protect your personal assets from business problems. The problem is, the company’s creditors will make you sign personally for all of the accounts and loans, thus the personal assets are at risk. The product liability insurance wouldn’t cover those things anyway. Unless the product is very dangerous, and the judgments will be huge, the company structure should protect the owners and their personal assets in a product liability suit.

I understand what you are saying. Never take your home out of your name and put your daughter’s name on it for any reason. If you don’t own it, it’s not your personal residence. You lose a bunch of benefits that the government gives home owners. Another problem is that if your daughter gets in trouble, gets in an accident or gets divorced your home is at risk.

If you put the home and other assets in a trust with your daughter as the trustee, this won’t give you any more asset protection. The trust will NOT be a grantor trust any more if your daughter is trustee, and technically will need to file its own tax return, and a bunch of other stuff. As trustee, your assets are not subject to her personal issues like the assets would be exposed if they were just in her name.

Without knowing all of your details I suspect the best solution might be to structure your business so it is in your name only. Never have your spouse involved in the business and try real hard not to have the nonparticipating spouse sign on any loans or anything associated with the business. You should have a his and her trust (one trust for each spouse) and put the high liability items in your trust and your home, cabin, bank account, etc. in your wife’s trust. This acts as a good liability shield in common law states. My best selling book, Guaranteed Millionaire, goes through the various options you have for forming a liability shield, using different business structures, and gives you a good framework for getting it done. Of course, the Accumulation and Preservation of Wealth has a ton of information on all this stuff. Make sure you listen to the CDs.

Q. How can I keep control of all my assets without being subject to the liability? Can some fashion of this solution also provide protection from probate?

A. You asked how you can keep control of all your assets without being subject to the liability. Of course it depends what you are trying to protect. If it is your home, a trust is a very good vehicle to avoid probate, but it won’t give you any asset protection. You can move ownership to the husband’s or wife’s trust and protect it from the other spouse’s liabilities (usually not the mortgages, because you have both signed the loans). Do not put your home in a “company.” You usually want to keep your home in your name (trust’s name) so you can keep the tax benefits. If it is a business or a rental property, then an LLC works well and gives great liability protection if the LLC owns the property. Without knowing your family situation it is hard to give a more definitive answer. This is one reason why I wrote Guaranteed Millionaire. It goes through the various asset protection scenarios so you can see the various options that work. The trust will protect you from probate. Depending upon the asset, a corporation or preferably an LLC will help you protect it.

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