Estate Asset Protection

Individuals generally seek estate asset protection to avoid paying higher taxes or to protect property from court-ordered seizure. Defined as one's personal property or possessions, an estate includes assets which can be taxed or regarded as income by federal and state governments. To avoid paying more revenue, individuals seek to reduce taxable income. The fewer possessions or property legally owned, the smaller the tax owed. In the case of a lawsuit, plaintiffs may succeed in winning judgments against defendants by seizing property as payment. The defendant's attorneys may help clients avoid legal seizure of homes, vehicles, equipment or businesses by implementing estate asset protection plans. In a judgment or lawsuit, plaintiffs may be able to lay claim to personal property owned by the defendant in order to satisfy outstanding debt. Unless owners file a homestead exemption to protect personal assets, or reduce the amount of property owned on paper, the risk of losing an estate to the court system is very real.

The practice of legally reducing property ownership has become an American way of life. Corporations open offshore enterprises to avoid paying taxes on domestic enterprises. Individuals may place property ownership in the name of a spouse or child in order to avoid taxation. Taxpayers and business owners may hire asset protection consultants to suggest and implement methods of protecting property from lawsuits, legal judgments, or tax liability. The main goal of lawyers and consultants will be to create a legal separation between the client and certain portions of their estate, or property. Since property ownership is attached to individuals via Social Security or Employer Identification numbers, the most effective way to create a legal separation for estate asset protection is to detach ownership from a client's identification number. The next consideration will be to attach assets of stocks, bonds, or personal or real property to a legal entity so that documentation will not disclose any relationship to the client. The Internal Revenue Service is just as aware of this tactic as the most astute attorney. An attempt to convey property in order to avoid prosecution or seizure related to tax obligations may be detected by the feds; therefore, individuals should consult an attorney before attempting to hide assets. "For the Lord giveth wisdom: out of His mouth cometh knowledge and understanding. He layeth up sound wisdom for the righteous: He is a buckler to them that walk uprightly" (Porverbs 2:6-7).

Estate asset protection may include placing property under a corporate structure, which will alleviate clients from personal liability. Incorporating businesses and placing assets under a corporate name, donating assets to an S-corporation, or forming a family limited liability corporation, LLC, also protects assets from legal seizure or personal tax obligations. Under a family LLC, only profits earned from the corporation are considered taxable income. Forming a family limited liability corporation is a do-it-yourself project; and forms are available online or at a local office supply store. Each family member can become a limited partner, with the head of household as general partner. Corporate papers must be filed with the office of the Secretary of State, which issues a Certificate of Corporation with affixed seal. Once the limited liability corporation is formed, a bank account in the corporate name can be opened and monies deposited into the account. LLCs are allowed to purchase real estate, land, other entities, or operate as a legitimate business. Real estate holdings, stocks, bonds, and other assets become the property of the LLC; and individual family members are liable only to the extent of individual contributions.

Other methods of estate asset protection involve investing capital in offshore enterprises. Some foreign governments do not tax property as heavily as domestic state and federal governments. Some forms of asset protection shield a limited amount of tax-deferred savings from taxation or judgments. Families can form trusts for minor children; and monies remain secure until legal heirs reach a certain age. Establishing trusts or foundations operating under an Employer Identification Number (EIN) are also methods of protecting assets. Workers and retirees may consider socking away money in a tax-deferred Individual Retirement Account (IRA). The federal government allows tax-free deposits of up to $5,000 per year until the age of 59 1/2.

Another way to shield assets is to invest in funds which do not have to be reported as income or purchase long-term securities, such as Certificates of Deposit or U.S. Treasury Bills. By making long-term investments, funds can accumulate without paying tax as long as they are not withdrawn early. Estate asset protection may also include gifting children with savings bonds to ensure that college funds are available by the time bonds or CDs mature. Parents and grandparents can gift a CD or bond at each birthday to safeguard the future financial security of young children. Attorneys and consultants can apprise clients of the most effective way to safeguard capital assets from litigation and exorbitant taxation.

Individuals seeking legitimate estate asset protection should surf the Web for links to reputable firms. Property owners may find attorneys that specialize in asset protection online or through the local directory. Legal consultants or firms should have a five to ten year record of working with a variety of clients. The local American Bar Association should have a profile on legitimate firms, along with the Better Business Bureau and the Securities Exchange Commission. These agencies will have positive and exemplary reports of work performed with other clients. Property owners can check references and ensure that companies comply with federal and state regulations. Websites for lawyers may include electronic forms to collect client data; however individuals should be careful about divulging personal information online, such as Social Security or bank account numbers. Most reputable firms will only request general information for later follow up via the mail or telephone. Individuals and businesses would be wise to implement an estate asset protection plan before the need arises. Consulting with an attorney will help clients understand what kinds of property qualify for attachment to another entity.

Personal Income Protection

The need for personal income protection has grown out of the fact that over 70% of all Americans live paycheck to paycheck, more than 25 million are underinsured, and most people have no savings at all. The idea of wealth is one that seems to change according to a person's current financial status and the physical environment they live in. For example; someone born and raised in a suburb in California, where the family has a nice two-story home with manicured gardens, pool, and newer car, would be considered wealthy by the vast majority of people world-wide. But, if that same family were being described by the elite of American society, they might be described as middle class. It's all a matter of perspective. Unless a person is at million dollar net worth status in the U.S., that person would probably not consider themselves wealthy. Sometimes when a person doesn't think there is much to lose, that individual might not protect it as well as if the person knew personal income protection may be needed. Now, with all of that being said, people do have assets. The assets owned may only consist of a house with a mortgage payment, a stamp collection, an automobile, and a couple of Certificates of Deposits worth $10,000. This is small change in terms of real wealth. However, it may be your only personal property. If someone were to come in and take any of those things away, it is likely to be a traumatic experience.

That's exactly what would happen in the case of a debilitating illness or injury. Thusly, there is a grave need for personal income protection. If a person is hurt on the job, there is typically coverage by worker's compensation or state disability. The employer provides this insurance to workers. Laws regarding workers' compensation were developed to make sure that employees are provided with a predetermined sum of money if they are injured or disabled as a result of something that happens on the job. A major purpose of this set of regulations is to eliminate lawsuits. The law states that the employee is to receive two thirds of his or her normal wages as long as the individual is disabled. Thusly, it covers medical bills and employee retraining. A disabled employee may receive additional sums for physical injuries that are permanent. In addition, there are benefits for dependents of workers who are killed on the job or develop work-related illnesses. Just think about it, if a person is disabled, they can receive approximately 60% of their salary.

Disability insurance covers the person when the illness or injury is not job related. If an individual pays for a disability plan after taxes, there are usually not any federal income taxes assessed on the benefit. Therefore, a disability insurance plan which provides personal income protection at the rate of 60% of a person's gross salary or wages actually replaces 85-90% of a person's spendable income. Most times, this amount of coverage will provide sufficient income to cover basic needs such as mortgage or rent payments, car payments maintenance, credit card and installment loan payments, insurance premiums, food, clothing, utilities, taxes, and school expenses. Because most people tend to live on nearly 100% of what they earn, there is still a loss of income gap of 10-15%. This gap can be filled using loss of income protection on specific accounts. This option is available when a person opens a credit account of any type. The individual is usually given an option of including disability or loss of income protection on that particular account. Coverage could be on a credit or charge card, a line of credit, a standard loan, or a mortgage. The beauty of this coverage is that a person's credit rating is protected because the monthly payment is still being paid. An individual could end up with their mortgage being paid and all of their credit accounts being paid. Personal income protection also takes a mental load off due to the fact that the financial burden is no longer a problem.

One does not have to be wealthy or even well-off in order to participate in a personal income protection plan. As a matter of fact, it should be relatively easy to find out how much coverage you would actually need to survive in case of crisis. First, take an inventory of all bills and monthly obligations. Now, multiply that amount by 6. The result is the amount of savings or personal income protection a person would need in order to maintain their current standard of living. If saving this amount of money is difficult, the other options are to use credit protection plans for each credit obligation. This will reduce the amount of a person's monthly outgo during the period of income loss. Then, set aside a certain amount of money per paycheck until you reach an amount that is equal to six months worth of non-credit obligations like; utilities, taxes, food, clothing, insurance premiums, and other out-of-pocket expenses.

No one knows when or what will come in a day. "If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness." (I John 1:9) But, when it comes to personal income protection, it's better to be safe than sorry. One should check with human resources at the job to find out exactly how coverage works at your job. Then, go about putting your financial house in order; just in case. There's an old adage that says "if a person fails to plan, they plan to fail." Knowing that 70% of people live paycheck to paycheck, there is a high probability that the person reading this article could be in that group. Take stock of the benefits available and make sure they are the ready in time of need.





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