How do I protect the assets I have from lawsuits, bankruptcy and the courts?

D.O., Maryland

It is best to get your asset protection take care of well before you get sued, go bankrupt, or have some other type of trouble.  Which instruments you use depends of the asset you are trying to protect. Your business should be held in an entity, your home should be held in a trust, rental properties should be held in LLCs.  I have this all laid out for you in my Accumulation and Preservation of Wealth Course.

The import thing is to take care of it now.  There is a three year draw back window on most transfers your make with litigation or bankruptcy in mind.  I always tell my clients that you do your asset protection today.  However there are certain investments that you can make that will help shelter your money.  For instance, in many states your homestead will protect a certain amount of money from being lost to either litigation or bankruptcy.  If you put your money in your home nobody can get it.  There are a couple of other tricks that will allow you to shelter even more money at the last minute.  If you are already in trouble get to a good planner as soon as you can.

I have been reading about the debt ceiling for three months now. I am tired of it but was amused to read an article about how things have flipped.  On March 16, 2006, a democratic senator denounced George W. Bush’s request to raise the debt limit. “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” the senator thundered. “Increasing America’s debt weakens us domestically and internationally. . . . Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”

That senator was Barack Obama, and he, along with most Democrats, voted against a higher limit that day. It passed only because almost every Republican voted for it, including many who are today among the strongest opponents of a debt-limit increase. Today the Republicans are dragging their feet and the President is telling them to eat their peas.   Now the Press is telling us that it is all for political gamesmanship.  I am tired of the games and am worried that the games could cost our country dearly.

Your estate planning is the same way.   If you don’t take care of things now, it may cause a lot of turmoil in your family later.  It may cost your family not only money, but it could also jeopardize family relationships. The sad thing is it is so easy to avoid these problems by just getting your estate planning done, yet so many people won’t take the time.

After Casey Anthony was found not guilty of murdering her two-year-old daughter Caylee, whose remains were found in woods near her Florida home, Casey’s parents slipped quietly from the courtroom.  On the news coverage, it appeared that the commentators were spuriously speculating on the relationship that Casey would have with her parents after she was released.

Would Casey dare go home after throwing her parents “under the bus” to win her freedom?  How could she face her father?  Maybe she could go home.  After all, her mom took the fall by claiming she did the awful computer searches on how to use chloroform.  I don’t know how, or if, the Anthonys will knit themselves together.  I do see an applicable lesson for estate planning.

Many parents put a child’s name on their property in an effort to avoid probate.  They figure that the property will go directly to the child when they die.  Legally it works, but it can often cause problems.  I always tell my clients to avoid this, because “kids are like yogurt, you never know when they will go bad.”

You may find yourself saying, “My child is a great kid.  She will not murder her child or commit any crime.  We are a very functional family.”  You are probably right, but consider this.  If you put your child’s name on your house and they are in an accident, the judge can take their half of your home to settle a claim.  Likewise, if your son is on your deed and he gets divorced, his ex may be given part of your home as the settlement.

It’s a much better idea to form a trust to avoid probate, rather than putting your child’s name on the deed.  It takes away the danger of a potential problem, and if your daughter ever tries to throw you under the bus, you can change your beneficiary without her signature.