The goal of effective estate planning is to try to maximize the protection of your hard-earned assets. The biggest hurdle that most people face, however, is not knowing what to do to ensure their financial future. It’s important to understand the difference between asset planning and estate planning. Understandably, these terms are very similar to each other and consist of a lot of the same verbiage.

Simply put, asset planning largely focuses on protecting your assets while you are living. As such, this includes things like your income and your property. Therefore, asset planning is essential when you want to make sure what’s yours stays yours and remains protected while you are alive. Estate planning involves determining who takes control of your will and trust after you die, who gets your assets and how, and other essential matters. That’s why it’s so important to be as detailed as possible when writing your trust. Moreover, you want to make sure you name the right beneficiaries and list important instructions to ensure that your wishes are met.

Asset planning and estate planning go hand-in-hand by protecting your assets during your lifetime and ensuring that those assets go to those you wish to benefit when you pass away. You can do so by creating an effective estate plan that utilizes a number of different techniques to maximize asset protection. Knowing which type of trust your estate will require is an integral part of planning for the future.

Notably, an increasingly popular tool to reduce asset exposure to creditors, lawsuits, ex-spouses, and other potential asset predators is something called a “domestic asset protection trust,” or DAPT. Traditionally, trusts were not very useful in keeping assets away from creditors. If you created trust from your assets and for your own benefit, creditors would still be able to reach those assets. Yet, about two decades ago, certain states started to change their laws on trusts so that people could create trusts that could not be reached by future creditors. A domestic asset protection trust is a “self-settled” trust (a form of an irrevocable trust), which means that there is an independent trustee who controls the trust and is responsible for distributing the trust asset to its beneficiaries. 

However, most estate planning professionals will agree that there is no one “silver bullet” strategy that will guarantee absolute protection in all circumstances. We urge you to establish asset planning and estate planning in advance. It’s always easier when you secure your planning well before they are necessary. By getting a head start on substantial changes in your life, you will find that these matters are much easier to handle when the time comes that they become necessary. Plus, planning now will make things much easier on both you and your loved ones when the time comes to discuss asset planning and estate planning. So don’t wait until there’s a problem to tackle your planning needs.

On September 13, 2021, the House Ways and Means Committee release a proposal for new tax changes that may impact longstanding estate planning strategies. Check out this short video with a message from board certified estate planning attorney Randy Doane on some of the proposed tax changes:

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