When we plan our estates, we think about maximizing our legacy and minimizing our taxes. After all, we would rather give our money to our uncle than to Uncle Sam.
What some Pennsylvania estate planners don’t realize is they can protect their assets from more than just the IRS.
What is asset protection?
Your estate plan can protect your estate’s assets from creditors and lawsuits. Without proper asset protection, a litigious person or creditor could wipe out your entire estate (and, thereby, your legacy as well). Though, you could also wipe out your own estate too.
Before going into asset protection, it is important to first look at personal protection. In other words: Protecting your assets from you.
As we age, we often need more and more expensive medical treatments and eventually, long-term care. These costs can eliminate estates and leave our families with debt. However, through long-term care insurance and irrevocable trusts, we can provide our estates with personal protection from these costs.
Insurance can be a great asset protection tool for Pennsylvania estate plans. Just as long-term care insurance can protect your estate from your long-term care needs, so too can other types of insurance protect your estate from lawsuits.
For example, an umbrella policy can protect you from car accidents where the damages exceed your policy limits. In combination with homeowner’s insurance, it can offer similar protection for any accidents that occur on your property.
For younger people or people with large debts, life insurance can build a financial bridge to the legacy you want to leave behind.
Protecting your home
Now that you have the appropriate insurances in place to hedge against risk, the next asset you need to protect is your home. For most homeowners, the family home is our biggest investment.
In most states, the easiest way to protect one’s home is to file for your homestead in your county. In most states, your homestead is protected from creditors and lawsuits, and that protection can often be unlimited.
Unfortunately, one blog post is too short to discuss all asset protection strategies. As such, we will discuss additional options in future Pennsylvania blog posts.