Asset Protection

A properly designed Estate Plan can shield you and your loved ones from creditors and predators by providing an effective means of asset protection.

Unfortunately, television and films dealing with this topic have spread some common misconceptions.  Many people interested in asset protection are further mislead by the ravings of “online experts”.  What one must first understand is that Courts are extremely motivated to see that creditors and injured parties get paid.  This is a fundamental truth in our society.  But despite this truth, and without any formal training, some people try to undertake this complicated and risky task themselves.  At best, these people are often disappointed when their assets are attacked.  At the worse they end up broke or imprisoned.

Many people  believe that they can protect themselves from creditors and lawsuits by putting their assets into a revocable living trust (RLT).  This is a common mistake which can be extremely costly.  If creditors are wolves, then the RLT is the straw house of asset protection.  That does not mean that they do not have their place.  Revocable living trusts are one of the most popular tools in Estate Planning, but not for the purpose of protecting the trust maker.

Another misconception is that you can protect yourself from creditors by simply moving assets offshore.  Moving assets offshore alone would be like placing them in a house of sticks.  Sometimes there are very good reasons to move certain assets offshore, but unless you live in a boat, it won’t work with your house.  Furthermore, governments and financial institutions the world over are beginning to cooperate more often as they come to the same conclusion as our courts; debts should be paid, scores should be settled, the injured should be made whole.

What about irrevocable trusts?  Irrevocable trusts can be extremely powerful tools in the hands of a skilled attorney, but there are many issues which must addressed in order to create a trust which cannot be invalidated as a form of fraudulent transfer.  Trying to protect an asset by simply giving it to a relative is just another stick house.

The only stone fortress in the field of asset protection is one made up of various elements or defenses, each selected by a skilled attorney for the specific role it plays in the structure.  But even the strongest fortress can be breached.  The truth is, some of the leading asset protection firms spend the majority of their time defeating asset protection schemes designed by untrained lawyers and misinformed debtors.  Anybody promising a fool-proof scheme is lying to you.

Knowing that no plan is foolproof  (unless the debtor is willing to serve prison time) and understanding that most creditors and predators are looking for low-hanging fruit, the best asset protection scheme for many people is the one that simply places their assets just out of reach.  A well designed plan can place your fruit out of reach of all but the most motivated creditors.  On the other hand, a poorly or overdesigned plan can simply make your fruit look bigger and tastier than it is.  If a creditor or predator sees a tasty looking fruit just out of reach, they might take the time to grab a ladder. The goal is to not be a low hanging fruit, but neither the tastiest looking fruit in the tree.

Asset protection should be an important goal of every estate plan and it starts with discussing your goals with your attorney.  At The Law Collaborative, Los Angeles we can design plans which make your assets a higher hanging fruit, or we can help you construct a stone fortress.  Call or email us for a free consultation or call (818) 348-6700.

In California, small estates valued at under $150,000 which meet all of the requirements of sections 13100-13115 of the California Probate Code can still avoid going through the costly and time consuming probate process even if the decedent failed to create or fund a trust.

To qualify the total estate may not exceed $150,000 in value and both the decedent’s real and personal property in California must be considered in determining the total value of the estate.  Insurance policy and retirement plan proceeds payable to the estate as the designated beneficiary must also be included in determining whether the total value of the estate exceeds $150,000.

The following property is excluded in determining whether the total value of the estate exceeds $150,000:

•Vehicles and other state-registered property: automobiles, “nonmotor” vehicles such as trailers, mobile homes, manufactured homes, commercial coaches, truck campers, floating homes and undocumented vessels;

•Unpaid salary: any amounts due to the decedent for services in the armed forces and up to $5,000 in unpaid salary or other compensation (including compensation for unused vacation) owing to the decedent for personal services from any employment;

•Joint tenancy interests, life estates, and property passing outright to a surviving spouse: all property held by the decedent in joint tenancy, or in which the decedent had a life estate or other interest which terminated at death, or that passes outright to the decedent’s surviving spouse under Probate Code section 13500;

•Multiple-party accounts:any multiple-party account to which the decedent was a party at death to the extent the funds pass directly to a surviving party, payable-on-death payee or beneficiary; and

•Inter vivos trust assets: all property held in a living trust.

The process is not simple and has many complex requirements which should discourage anyone from trying to complete the without experienced legal assistance, however it is still quicker and less expensive than going through probate.

The Law Collaborative, Los Angeles, has flat fee packages available for those who qualify for the small estate administration process so you can know and budget in advance during the challenging period which follows the death of a loved one.  Call us today at (818) 348-6700 to schedule your free consultation.