Asset protection is the process of employing risk management products and legally acceptable solutions to ensure a person’s wealth is not unjustly taken.

Ever heard of the rule of entropy? Roughly, it says that things tend toward chaos. So it is with business and the chaos of litigation.

If you are a small business owner, then you simply cannot have your greatest personal asset, the greatest family asset, and the activity you are most proud of eroded, chipped away or swallowed whole by litigants or creditors. You need a plan to protect the business as an asset.

Whenever an asset is important it is also worth your time to protect it. Businesses are a unique kind of asset. Protecting them requires a certain kind of thinking and planning. Unfortunately, most business owners simply have not done their due diligence with asset protection planning. However, even if you’re in the know, it is worth reading the recent Private Wealth article addressing this important topic, “Asset Protection For Business Owners.”

Asset protection is always about assessing the risks to the asset. The primary risks to any successful business are litigants and creditors seeking a piece of the pie. No one really likes or trusts creditors, but far and away it is litigation that can take down a thriving operation. It doesn’t even have to be a “legitimate” lawsuit if it’s litigation against the business itself. While we are at it, let’s not forget about personal litigation or divorce.

Nevertheless, structuring the assets of the business and the business itself is a tremendously powerful way of shielding you, your family, and the wealth tied up in the business from being taken down. But here’s the rub: a plan in place is often a saving grace where the plan left on the chalkboard is always just wishful thinking.

Here is a funny bit of math the article pulls out of a recent study by Price Associates: “About 89.7% of these business owners said they are concerned about such lawsuits, but only 26.9% have an asset-protection plan.” Why so few?

Whatever the source of risk to the business as an asset, there are a wide variety of strategies that can be employed to limit or eliminate the risk. Utah has enacted legislation allowing asset protection trusts that, if properly implemented, may be a powerful asset protection tool for Utah residents.  A powerful protection might even stop a suit dead in its tracks long before a plaintiff engages the court! To do the most good the plan must be developed with all the variables in mind and by a seasoned professional. Above all, however, this essential planning must be completed before it’s really needed. So don’t put it off and leave your business at risk.

Reference: Private Wealth (March 7, 2014) “Asset Protection For Business Owners”

Much is undoubtedly delivered with great love and compassion. But, sadly, it is also provided by family members who have no caregiving skills.

Deciding on medical care later in life or setting it up for a loved one is a difficult process that should be thoroughly evaluated. While there are many options available, essentially the decision comes down to care at home or in a facility. Is the quality of care comparable, especially when it comes to in-home care?

The answer seems to range from “we don’t know” to an unhelpful “it depends.” With so many people receiving care at home, either by default or by design, it is an important option to understand. A recent article in Forbes, titled “We All Want To Live At Home In Old Age, But Know Nothing About the Quality of Care We’ll Get There,” to a look under the hood on this subject.

The problem is a knowledge-vacuum. There are many levels of oversight for skilled nursing homes or other care facilities. On the other hand, there are few levels for care received in the home.

In-home care may be delivered by a loved one, but it may also be delivered by a paid aide through Medicare home-based long-term services or some other program. There has been large expansion in the kinds of services available, but most of us have a hard time figuring out the quality of care available. The quality of care that can be provided should be carefully monitored and the selection of caregivers thoroughly checked.  Be sure to consult an experienced elder law attorney who is “plugged into” the network of care providers.

Reference: Forbes (March 19, 2014) “We All Want To Live At Home In Old Age, But Know Nothing About the Quality of Care We’ll Get There”

NING, Ding, Grat. Ilit, Crat, Crut, Qtip.

So what are these oddly named trusts and what do people who need them need to know?

Ever been to a place where you don’t understand the language? Learning a new language is no easy task. At least when it comes to French or Italian (or Hindu, Swahili or Balinese, if you happen to be that well-travelled) most us of who can’t speak a lick can get through with pointing and smiling. However, when it comes to technical languages there is a different type of difficulty.

Without a doubt, the language of trusts is a technical language. In fact, this foreign language can intimidate even the savviest practitioners. The language of trusts is a powerful language and the trust, in its many flavors, is a powerful tool. How can you learn the lingo?

If you haven’t run into the technical language of trusts just yet, you should know that it is a world of acronyms and alphabet soup. You’d do well to have flash cards for a litany of trusts such as GRATs, CRUTS, CRATs, NING, DING, QTIP, and so on. Alternatively, you can learn a bit more of the lingo in a recent New York Times article titled “The Argot of Trusts, as Told in Acronyms.”

Each acronym and each form of trust for which it stands should be taken on its own to do it justice. Trusts are powerful machines that can be defined in very particular ways, not unlike backhoes, iPhones and particular accelerators. Each is a very different machine because it is made to do very different things. Such is the case with things like GRATs, CRUTs, and generic revocable trusts.

Don’t let the technical language get in the way, but do ask the right questions. Namely, what do I need to accomplish? What trust can accomplish my goals and is it the best route?

Not every trust is right for everyone or every asset, and some people will not be better off with a trust of any variety. Finding the right trust, or finding out if a trust is right at all, is about weighing your goals and assets. In this respect, a seasoned estate planning attorney is instrumental when it comes to teaching you the language, serving as translator, and forming the right plan for you.

Reference: The New York Times (March 28, 2014) “The Argot of Trusts, as Told in Acronyms”

FLPs offer multi-layered benefits by providing senior family members with several advantages—all without ceding control of the assets to junior family members.

Estate Planning is often a game of give and take. So what if you want to give away your assets, but not just yet?

As is so often the case, where there’s a need there’s a tool. A particularly powerful tool in this case is the Family Limited Partnership (FLP). An FLP can do double duty as a tool for asset protection as well as for estate planning.

Family Limited Partnerships have long been a useful tool for many, but Forbes recently offered a helpful perspective in an article titled “How To Protect Your Assets Without Giving Up Control.”

You see, the FLP represents a way to separate control from direct ownership of assets. Those in business will understand the benefit of indirect ownership quite clearly. Indirect ownership is the essence of forming an entity to structure a business – an LLC or a corporation, for example – which protects the owner(s) from liabilities, creditors and the like, and often vice versa.

A Family Limited Partnership is, in reality, a form of a Limited Partnership. The distinction? You just use it for family assets like a house, individual assets, and anything you’d want to control even as you protect it and slowly gift it away.

Well, how does that work?

Limited partnerships allow for different types of partnership stakes: general partnership interests are vested with all the control, while limited partnership interests just represent ownership without control. Even if the limited partnership interests outweigh the general partnership interests 99 to 1, the general interest retains control.

This arrangement has a business use, but in a family it means that the parents can own all of the general partnership interests while granting out limited interests to the Family Limited Partnership that owns all of the assets. The parents keep control, the children slowly/eventually take on ownership, and creditors or claimants have a more difficult time touching the assets.

As you might have guessed, there are even tax benefits when it comes to bequeathing or gifting the FLP assets.

There is a great deal of finesse required to make an FLP arrangement work. Consideration of such issues as “phantom income” should be carefully considered.  The advice of an attorney or a CPA experienced in dealing with these issues should be consulted before creating such an entity.  Nevertheless, in its basic form the benefits are clear. Once again, in determining the structure of the FLP and in actually setting it up, competent counsel can mean all of the difference between a fully balanced and solid plan, and a potential mess.

Reference: Forbes (March 18, 2014) “How To Protect Your Assets Without Giving Up Control”