Tag Archives: Estate

Protect Your Assets

The following are a few tips on protecting your assets from financial disaster:

1)  Hold property in an entity.

A properly established and administered entity can protect your assets from lawsuits and claims made against you.  It is necessary, however, to be sure to follow all formalities necessary in administration of the entity; otherwise, you risk a court “piercing the veil” and attaching your assets to a claim or lawsuit.

2)  Never enter into a General Partnership.

A general partnership will form as the default entity of a mutual business agreement.  Without a proper business entity, all of your assets are liable to be lost in a lawsuit.

3)  Subdivide Property Holdings into Separate Entities

By creating separate entities for each unit of real estate, you protect each individual parcel from suits on the other.

4)  Consider the tax impact.

Holding real estate in a C-Corp, for instance, is a poor idea due to the tax costs of liquidation under subchapter C of the Internal Revenue Code.  Any appreciating asset should be held in an LLC to avoid any great tax burden upon sale and liquidation.

5)  Carry adequate insurance.

This is one of those “duh” kind of things.  Insure your assets, as there is no greater protection from depletion.

6)  Dilute ownership

By removing 100% ownership of an entity, any suit against you personally will be sure to protect a portion of the companies assets.  For closely held businesses, a family estate plan may be utilized to help dilute assets through separate classes of stock and annual gifts.

7)  Buy-sell agreements with fellow shareholders, partners or members.

Purchase life insurance on one another and enter into an agreement that any remaining business partners will purchase your share in the company with the value of the life insurance.  This eliminates what otherwise could be a giant headache.

8)  Consider creating a trust.

There are a vast number of trust planning strategies that allow for the protection of assets.  What kind of trust to use depends greatly on your particular circumstance.

9)  Create a QPRT.

Placing your personal residence in a Qualified Personal Residence Trust can help protect yourself from judgments and creditors and prevent you from homelessness.

10)  Invest in exempt assets.

An IRA, 401(k), SEP and annuities are all examples of exempt assets that will be protected from creditors.



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The Power of Attorney

People often mistakenly believe that the only way they may be able to make important decisions for their loved ones when a loved one becomes incapacitated is if they are their spouse.  This is categorically untrue and much of it stems from uninformed statements collaborated by influential outlets.  Whether you’re married, divorced, single, widowed or have a long-term significant other, you may designate that person as your attorney-in-fact at any time.  The medium by which you accomplish this is the Power of Attorney.

Generally, the Power of Attorney comes in two forms: 1) a Durable Power of Attorney and 2) a Health Care Power of Attorney (or Advanced Health Care Directives.)  Both serve different purposes, and will be explained further below.  Before giving a brief explanation of the two, however, it is important to note that these documents are generally drafted with your Last Will and Testament, a document that all individuals should strongly consider having (see earlier blog post).

The Durable Power of Attorney

The DPOA is a document that appoints an individual as attorney-in-fact over your financial affairs.  Under Indiana law, a DPOA can include the following specific powers:

real property transactions; tangible personal property transactions; bond, share and commodity transactions; retirement plans; banking transactions; business operating transactions; insurance transactions; transfer or payable on death transfers; beneficiary transactions; gift transactions; fiduciary transactions; claims and litigation; family maintenance; benefits from military service; records, reports and statements; and estate transactions.

Furthermore, the DPOA includes a grant of broad powers pursuant to IC 30-5-5-19.  This allows the DPOA to essentially handle all of your matters for you, in the event that you become incapacitated.

This document is paramount to your financial well-being in the event that you become incapacitated.  If you fail to have a Power of Attorney, your family will find themselves in a situation in which they must petition the court for a guardianship over you and your financial matters.  These can often be strung out and expensive, and financial matters may not be handled as quickly as they need be handled.  The added stress of this situation can all be alleviated by simply planning ahead with an estate plan and power of attorney.

Health Care Power of Attorney

The Health Care Power of Attorney gives authority to an individual to make important medical decisions in the event that you become incapacitated.  The power authorized by IC 30-5-5-16 include:

To employ or contract with servants, companions or health care providers to care for you; To consent or to refuse health care for you; To admit or release you from a hospital or health care facility; To have access to records, including medical records, concerning your condition; To make anatomical gifts on your behalf; To request an autopsy; and To make plans for the disposition of your body.

This is a rather morbid topic, however, planning for this can relieve a great amount of stress and weight from your family’s shoulders.  This simple document can allow an individual to make decisions tantamount to your health, that otherwise may not be available to that individual.  This is a subject you must discuss with your attorney-in-fact for your advance health care directives, and be clear about what you want done.

There really is no reason to put these planning documents off.  Every day they are put off, which happens all too often, is another day you risk not having a decision-maker in place for you in the event that you become incapacitated.



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