Legal Issues with Estate Planning: Who Needs to Protect Their Assets?

In this day an age, it is important to stay vigilant about protecting your assets. America has often been referred to as a litigation-friendly society, meaning that we are prone to engaging in lawsuits for even the most frivolous of "offenses." People have been sued for anything and everything including: having wireless internet in their homes, not raking their front walkways, coughing in public and giving bad reviews of former employees.

While you may not be able to protect yourself from falling victim to lawsuits by opportunists, you can and should take every prophylactic measure possible to ensure that a plaintiff does not liquidate your estate, should the court rule in his or her favor. After all, if your estate is vulnerable, you risk losing not only all of your money, but the entire estate intended for your children and other desired beneficiaries.

Here, we have compiled a short list and corresponding explanation of the four most basic methods that you can use to protect your assets from lawsuits.

The Children's Trust
The Children's Trust is the Trust fund that you set up to directly benefit your child. While the Children's Trust does not offer you access to your funds once they are placed into it, you will ensure that your children will have sufficient monies for use on things such as an education or first home.

You may put a maximum of $11,000 per year into the Children's Trust Fund, per spouse. If you and your spouse both put money towards the Fund, then you can put $22,000 per year into it.

When you put money into the Trust Fund, you can deduct the money from your annual earnings, in many cases, taking you down a tax bracket if your child is over the age of 14. However, once you put money into the Fund, you cannot retrieve it. You can also not transfer the money during the lawsuit, so if a claim against you is pending, you are not able to transfer funds. Thus, it is a smart move to continually invest money into your Children's Trust to ensure that your children will have sufficient support in the event that your estate is liquidated.

The Irrevocable Life Insurance Trust
The Irrevocable Life Insurance Trust, otherwise known as the ILIT, is a sound move for individuals even if they are not in a position to be faced with litigation. An ILIT simply allows for your entire life insurance policy to be passed onto your heirs should you become deceased. If you do not have an ILIT, then the government will tax any money earned from your life insurance policy by your beneficiaries.

For an ILIT to work, you have to name a trustee. The trustee then has to purchase a life insurance policy with your name on it. You can provide the funds for him or her to purchase the policy.

The major benefit of an ILIT is that, unlike a simple life insurance policy, you can control how the funds from an ILIT are spent. You can delegate a portion of funds to education, individuals, and other causes to ensure that your hard-earned money is spent in the fashion you would best support.

Family Limited Partnership
A Family Limited Partnership is similar to a Limited Liability business partnership in that you and your family members will have control over a mutual pool of assets.

There are two different types of Family Limited Partnerships: General Partnership Interest and Limited Partnership Interest. The General Interest allows you to have control over the funds and how they are used, whereas the Limited Interest keeps your involvement at a minimum.

As with a business partnership, each partner has access to a specified amount of funds when the assets are distributed.

Foreign Asset Protection Trust
A Foreign Asset Protection Trust is similar to having an foreign bank account, in that your transactions will take place overseas. The major benefit of having a Foreign Asset Protection Trust is that your trust will be out of the hands of US jurisdiction. In other words, the US courts cannot access your money in the event that you are sued and found responsible for a portion of the damages awarded to the prosecutor.

Furthermore, you do not have to pay taxes on the money that you store in your Foreign Asset Protection Trust.

With a little help and planning, you can protect yourself and your family from predatory lawsuits against you. The above methods not only save you from losing your entire estate, but they are also strategic ways to set aside funds for your beneficiaries, even if you are not the victim of a lawsuit.If your estate is vulnerable, you risk losing not only all of your money in a lawsuit.The Children's Trust is the Trust fund that you set up to directly benefit your child.An ILIT simply allows for your entire life insurance policy to be passed onto your heirs.With a little help and planning, you can protect yourself and your family from predatory lawsuits against you.http://www.google.com/url?q=http://www.alperlaw.com/irrevocable_trusts.html&sa=X&oi=revisions_result&resnum=4&ct=result&cd=1&cad=revid%3D600694059&usg=AFQjCNG-jDaqL_4a4uD9AJvI6kyjwRXmWw