FEATURE — Many professionals fail to think about asset protection until they actually need it. This is an unfortunate trend, especially because individuals in business or professional services are more likely to be involved in situations that create financial risk and lead to potential liability.
In a recent study by the American Medical Association, six out of 10 physicians 55 and older have been sued. It pays to have an effective business and estate plan prepared in advance.
A properly implemented business and estate plan includes safeguards to protect against potential liabilities and unplanned tragedies. There are a few steps that professionals should consider in order to protect their family, assets, and estate.
- Form and maintain proper business entities and documents (LLCs, corporations, buy-sell agreements, employment agreements, etc.)
- Implement and update estate planning documents
- Title assets carefully and consider the option of separate marital trusts
- Become familiar with the new Utah Domestic Asset Protection Trust
Form and maintain business entities
Business entities are the simplest way to protect nonbusiness assets against creditors. A properly maintained business entity can protect personal assets from claims against the business or real estate owned and operated by the entity. Because the laws are constantly changing, it is important to update company documents including partnership agreements, buy-sell agreements, and employment agreements.
The governing documents for a corporation or limited liability company, LLC, must be up to date with current laws and should be followed in order to avoid potential personal liability for the shareholders or partners. As an example, the Utah Limited Liability Company Act was completely revised effective January 1, 2014. Newly organized LLCs must comply with the Act, and LLCs organized prior to 2014 should be reviewed to incorporate the requirements of the new Act. Additionally, a properly drafted buy-sell agreement can provide for smooth transition and buy out in events such as death or incapacity of a partner.
Implement and update estate planning documents
A properly implemented estate plan can avoid the expense and delay associated with a court administered probate. Estate planning allows for an easy transfer of assets to loved ones upon death, including provisions for minor children, heirs with special needs, guardianships, and other individual needs.
Effective estate plans also minimize taxes and can protect assets from creditors. Estate planning is an essential tool for individuals with any size estate. In most cases, a properly drafted trust is the heart of an effective estate plan.
Title assets carefully and consider the option of separate marital trusts
In situations where one spouse in a marriage is more susceptible to liability than the other, or where one or both of the spouses have been previously married, it makes sense to consider separate trusts. Having separate trusts enables professionals to take full advantage of the marital estate tax deduction, allows certain assets to be held in trust for the spouse who has low risk or exposure to potential liability, and provides individualized planning for children and assets in cases of second marriages.
Become familiar with the new Utah Domestic Asset Protection Trust
In 2013, Utah enacted a new Domestic Asset Protection Statute, which provides some of the strongest options in the country for those looking to shield assets from creditors or predatory litigation. The law authorized the creation of DAPT with significant asset protection features that makes Utah one of the best jurisdictions in the nation for self-settled spendthrift trusts.
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Written by R. Daren Barney for St. George Health and Wellness magazine and St. George News.
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