J. Kelly Kennedy, Attorney/CPA, PLLC

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Asset protection is essential for estate planning

People often pre-plan for their career, business, marriage and children. However, people sometimes forget about planning for emergency situations like death. It is important that all individuals think about these things and plan accordingly.

Florida residents need to understand the importance of estate planning. Conflict often accompanies ownership or inheritance of property. Thus, estate planning may save family members from legal troubles and financial problems. Furthermore, estate planning is very important for business owners to save their families from creditor harassment.

With estate planning comes the need for asset protection. How can a business owner protect his assets? There are several ways to do so. Incorporation of a business or formation of a limited liability corporation is one of the safest and most effective ways to protect one's assets.

Asset protection should be executed when the business is in good shape and in good health. Thus, an asset protection strategy should be pre-planned. Asset protection is a complicated area. For example, forming an LLC restricts creditors from taking all the actual assets of the business. A change in the place of registration of the business may also affect creditors' interest as some laws are more favorable toward debtors. Also, it makes it difficult for the creditors to find the debtors.

Transfer of business ownership to a trust may also work as it becomes difficult to identify the true owners for the creditors.

Asset protection differs by state and the rules vary widely. Also, many asset protection strategies have huge costs or tax implications. Change in ownership may subject one to an income or gift tax. Thus, one should weigh the costs and benefits before adopting a particular strategy.

Finally, asset protection is a useful tool for estate planning, both on the personal and business sides. However, it is important for people to make sure that everything is done honestly.

Source: Forbes, "Asset Protection: Business Owners Beware!," Steve Parrish, Jan. 23, 2013

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