What is Asset Protection Planning?
Asset protection planning could be something you undertake for yourself or it could be something you set up for your surviving spouse and children. Many parents choose to leave the assets to their children asset protection trusts that protect the children’s inheritance from the child’s lawsuits, creditors, divorce and/or bankruptcy. For example, first let’s assume you leave $500,000 to your child outright via a will. A year or two after receiving the inheritance, your child’s spouse files for divorce and claims $250,000 in the divorce settlement. Now, let’s assume instead of leaving the $500,000 to your child outright, you instead left it in an asset protection trust for your child. A year later when your child’s spouse files for divorce, he or she cannot make a claim to the assets in the trust.