Asset protection is a very important topic and the time you plan your estate is an ideal time to consider asset protection.  It is at the planning stage that all assets are listed and the ultimate disposition decided.  It is appropriate at this time to consider any risks associated with your occupation or other circumstances.  For example, you may be at risk for liabilities arising out of your business activities or risks associated with children who may drive or engage in similar activities.  There are many methods by which individuals can shield assets from debt collection.  Here are a few ideas.

1. Retirement Plans.  Consider funding retirement accounts.  Certain retirement plans are protected under federal and state laws including exemption and protection in bankruptcy.

1. Asset-protection trusts.  An asset protection trust cannot be created by an individual for his/her own assets.  To be effective, the trust must be created by another party, such as a parent or grandparent.  It is important to mention when you meet with your attorney that you want to provide asset protection for your children.  Similarly, if your parents have significant assets they need to know that the assets can be left to you in a manner designed to provide asset protection. 
2. Tenants by the Entirety.  Married couples living in Hawaii can hold property as “Tenants by the Entirety”.    Creditors generally cannot reach this property unless both spouses are found liable.  This can be very effective protection if, for example, liability arises out of your business and your spouse is not involved in that business. 
3. Buy Insurance.  One of the most effective protections for your assets is to buy insurance that covers potential liability.  Car insurance is a common example.  A provision can often be added to a homeowner’s policy to cover liability arising out of home ownership.
4. Create an Entity.  This is an area where asset protection can be combined with estate planning.  For example, limited partnerships, limited liability companies, and corporations   are often used to consolidate assets and transfer substantial interest to heirs.  At the same time, debt collection against partnership assets is cumbersome.
5. Aggressive Alternatives.  Creating an offshore trust can be expensive and risky.  However, a creditor may be discouraged from pursuing assets in an offshore trust simply because it is more difficult and time consuming.  (It should be noted that the IRS has shown no reluctance to pursue offshore assets.)  Certain states including Alaska, Nevada, Delaware and Rhode Island provide protection for assets contained in trusts created in those states.  There are some cautions however.  The assets must be located in the respective state and held by a trustee other than you.  It’s also unclear that a trust located in one of these states is effective for a non-resident.

Law Office

of Karen S. Baldwin

Princeville Center Suite B 202
Post Office Box 223891
Princeville, Hawaii 96722

808-826-7888 phone
808-826-4227 fax
Kbaldwinattny@hotmail.com