Everybody with assets and possible legal liabilities can benefit from some form of asset protection. Of course, that leaves you wondering when is the best stage of your life to institute an asset protection. Like any question you pose to an attorney, this answer is the same response as you would get to most questions. Similar to nearly every other legal issues, the answer is that it depends. To elaborate, your situation in life and what you are trying to protect will determine whether you need asset protection as opposed to the chronological number of your age.
First, let’s start by reviewing what asset protection is and why it is helpful so you can see when is the best time to start. Asset protection is a broad term for any one of a number of different strategies that can keep your assets in your hands as opposed to being lost to someone who is suing you or a creditor. These could be formal instruments such as trusts or strategies such as putting more money into things that may be legally protected such as real estate, a retirement account or life insurance. The most important thing to remember about asset protection plans is that they must be in place before there is a specific and concrete threat to your assets. In other words, if you move money into a trust after you have already been sued, a court will disallow the trust, and it will be as if you never created it since the court will view the transfer as fraudulent.
With that in mind, we can now discuss when is the best time to begin an asset protection plan. Generally, so long as you have assets, it makes sense to start thinking about what steps you want to take to protect them. However, the type of asset protection plan that you select will vary based on your situation in life. For example, you will not want to put assets in a trust to protect them from long-term care payments while you are in your 20s because your money can still be effectively used for other necessities.
Typically, you will want to begin work on an asset protection plan when you see a possibility that there may be liability that threatens them. This will hold true regardless of your age. An example of this would be a doctor or a lawyer who is thinking about striking out on their own and starting their own practices. These types of professionals are prime candidates for asset protection plans. They have the potential to be sued for malpractice, and, if their insurance does not cover the entire verdict against them, they can personally be on the hook for the balance of their verdict. This could be financially ruinous. With that in mind, it is critically important for them to establish structures that will put much of their assets off limits to people who would be trying to sue them. This is not so much dependent on age as it is on where that person is professionally. In other words, anyone who has risk must take steps to lower the risk.
At the same time, things that you do not even think of as asset protection really are, and you can be beginning an asset protection plan even if you do even consciously mean to do so. When you think of your home as a form of asset protection plan, you can be beginning one even in your 20s. There are very few ways, if any, that a litigant can get their hands on your primary residence as it is almost always protected. Similarly, most states have exceptions for any assets that are kept in a life insurance policy up to a certain amount.
There is almost always a time for you to consciously begin an asset protection plan. When you are beginning to age and a nursing home may be on the horizon, you should start considering placing your assets into an irrevocable trust so that you can qualify for Medicaid. Otherwise, nursing homes can properly look to you to pay for the costs of your long-term care, and the money that you want to pass along to the next generation may be depleted in your lifetime. The proper age for this would most likely be around the time of retirement. Medicaid has lookback periods that will attempt to spot your assets within five years of when you need the government funding for your long-term care.
There may be other situations where you could need asset protection at any point in your life. For instance, some people attempt to protect their assets from the harmful effects of a divorce. This could be useful in your 30s or 60s.
As you can see, there is no one set time or age that can be pointed to as being THE time when you need to begin asset protection. If you feel that you are in a situation where this may be necessary, you should contact an asset protection attorney to begin the conversation about possible steps that you may need to take. At Mile High Estate Planning, we specialize in exactly this, and can help you plan and execute a full asset protection strategy with both short and long-term steps that you can take to achieve maximum protection.