- DIY. Developing one’s own trust or will and making account and property title adjustments without the counsel of a lawyer might seem like an affordable route to asset preservation. However, do-it-yourself planning exposes assets to multiple potentially costly risks. While online research and self-education through the latest wealth management books can be empowering and may aid in helping one to understand key concepts of asset management, one should nonetheless consult with an attorney practicing estate planning and asset protection to ensure their plan meets their goals and adequately safeguards their assets. An estate planning attorney can explain how state and federal laws apply to an individual’s unique situation while helping an asset owner to understand existing and pending legislation so that the owner can feel confident in their planning decisions. Consider the reality that most DIY trust templates are commonly drafted “one-size-fits-all” documents without regard to the particular laws of the state in which they are put into place or, potentially, reference outdated legislation. Effective planning is not a singular event – it involves regular reviews and adjustments, which might require properly modifying trust and other planning documents to account for changes in legislation or in one’s life circumstances. Furthermore, certain asset title changes done without the guidance of counsel could inadvertently leave the assets vulnerable to creditor claims or result in adverse tax consequences.
- Timing. If an individual hasn’t regularly maintained an asset protection plan, a judgment or pending claim might prompt them reflexively to restructure assets. Otherwise legal and properly executed protection methods might not be recognized as such if timed closely to receipt of a creditor claim or judgment. Individuals should consult an attorney before attempting to create a trust, gift, or transfer assets surrounding an active lawsuit, as these actions might be recognized as ‘fraudulent conveyance.’
- Gifting. Some individuals attempt to shield assets from creditor claims or other risks by retitling the assets in another family member or friend’s name. This prompts several concerns, one of which being the risk of creditor claims against the named individual. In addition, some account owners might not realize that retitling assets jointly with another individual might be incongruent with their overall plans regarding distribution of their estate. Another concern is that some methods of titling could be recognized as a gift by tax authorities. This could then trigger gift tax consequences and, depending on the circumstances, capital gains and income tax consequences as well. Consult with a tax attorney regarding any asset transfers to non-spouses valued at $14,000 or more to determine if a gift tax return is required.
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