Asset Protection FAQ

June 5, 2020

As the owner of a sizable estate, protecting your assets becomes essential. Get answers to common asset protection questions for a better idea of your estate planning needs. Depending on the number of assets you have, you may need to contact a Los Angeles accounting firm for assistance. 

Are There Numerous Asset Tools Available? 

Protecting assets typically requires creating entities such as irrevocable trusts and limited liability companies (LLCs). An irrevocable trust transfers your assets to a trustee until it’s time to distribute the listed estate to your beneficiaries. A limited liability company forms with help from assets; however, you maintain control over the estate. 

If you create an irrevocable trust, your assets become safe from creditors because they are no longer in your name. If you create an LLC, you enjoy protection from liability lawsuits, such as those involving accidents on your vacation property. An LLC also provides asset protection by avoiding member-related liabilities. A member of the LLC who commits a misdemeanor, for example, cannot use their investment in your property to pay legal fees. 

Will My Retirement Assets Become Subject to Creditors? 

Any assets listed in a retirement plan becomes exempt from creditors under federal law, including 401(k)s, profit sharing plans, and pensions. IRAs, SIMPLE IRAs, and Roth IRAs typically do not enjoy federal protection; however, laws vary by state. In California, for example, IRAS do not receive federal protection under the Employee Retirement Income Security Act (ERISA), unlike 401(K) accounts, dental and vision plans, life insurance plans, HRAs, HSAs, disability benefits, accidental death benefits, pensions, and profit-sharing plans. 

Are Some Asset Transfers Considered Fraudulent? 

Any assets transferred following a lawsuit or other legal claim made against you are considered fraudulent. Assets transferred prior to lawsuit filings are deemed legal and valid. However, fraudulent conveyance issues can also arise, such as transferring assets quickly and without consideration because you know of a pending legal issue. If you need to transfer assets due to “distressing times,” discuss your legal options with Encino tax consultants. 

Get more answers to asset protection questions by contacting Wallace & Associates today. The Los Angeles accountant service counts asset protection among their many offerings.