Asset protection is strategies to place assets outside the reach of future potential creditors. The goal in the estate plan is to preserve the estate by minimizing estate and inheritance taxes, reducing administrative expenses and protecting against risk. Asset protection fits with the goal of preserving the client's estate. This does not include fraudulent transfers, hiding assets from creditors, or evading taxes. The purpose of asset protection is protecting the inheritance.
The intersection between estate planning and asset protection lies in the tools and processes used by planners that effect the ability to protect assets. This is the first in a series of discussions about the tools and processes at the intersection of estate planning and asset protection.
The first line of defense is the maintenance of proper insurance coverage associated with business and personal risks. This could be as simple as purchasing a million dollar umbrella policy or increasing existing coverage and confirming the existence of directors and officers liability coverage where appropriate.
Insurance provides a source for legal fees in defending a suit which can be significant depending upon the type of litigation. Insurance is a source of funds for settlmeent purposes or upon judgment. This type of insurance protects personal assets from the claims.
There are competent insurance professionals who can review the risk and recommend the proper insurance coverage and product as well as review existing policies for adequacy and appropriateness. A total review of risk and need is well worth the time.