Economist Arthur Laffer pointed in the right direction when he concluded, “For me the issue is how to protect assets for my grandchildren.” To protect one’s assets, Forbes magazine shares some nuggets of wisdom, “asset protection, like a portfolio, should be diversified.” But please keep in mind that the following asset defenses can change depending on state law.
Sharing assets with your spouse seems effective. As Forbes explains, “Your creditors generally can’t reach assets held by your spouse, or assets held by you and your spouse as ‘tenants by the entirety.’ In contrast, in some states they can come after your half of a house or bank account held as ‘tenants with right of survivorship.'”
An interesting way to guard assets is to create a limited liability company (LLC). If you, for example, rent out a home and the tenant sues you for harm done to them because of your property, your liability will be limited to the assets in the LLC.
It’s also wise to consider promising percentages of your assets to charities so that when you die, a charity would receive 10% of the trust’s value (10% is the minimum required by law.) The great part is that, that portion of your asset is deducted from your income taxes.
Since 1997 Alaska, Rhode Island, Delaware and Nevada have passed laws that protect assets from creditors once they have been on they’re trust for four to six years. Although out of state deals draw a question mark as to if they work. Forbes advises, “In any event, get an independent trustee, or a court could simply order you, as trustee, to fork over the money.”
Milton Friedman was watching a growing recession many years back and bought a castle. Friedman was looking for something that will go up in value. While you don’t have to go out and buy a castle, during these days assets are valuable and protection is key.