Our research has discovered these three mistakes in asset protection planning that are commonly made by clients.
Asset Protection Planning Mistakes
Placing assets in a revocable trust.
A revocable trust is just that…revocable! The person who creates it can revoke it whenever they want. If the trust’s creator revokes the document. Then, the courts allow creditors to collect from the trust assets, if necessary.
Some clients make the mistake of mixing personal and business assets. This allows a business creditor to attack a personal asset or vice versa. Other clients make the mistake of placing too many assets in one basket. It is common to see a client with a trust that owns an LLC, and have three investment properties under the LLC. Should anything happen on one of the properties, the judgement creditor could potentially claim against all three properties.
Asset protection planning is all about protecting your assets in the event of a crisis. However, you can’t wait until after the crisis occurs. At that point, transfers may be extremely costly, and can be ineffective and sometimes, fraudulent.