Careful, thorough estate planning protects your assets in the event of unforeseeable events that could destroy your financial security, such as unanticipated liability. To illustrate how quickly liability can arise and how asset protection trusts can safeguard your financial legacy, this article presents a narrative based on events that actually occurred not long ago.
Bill and Nancy are both in their mid-70s. They got married more than 50 years ago. They both worked hard all their lives at a Georgia manufacturing plant. Like many couples their age, they lived frugally and saved every penny of their hard-earned money.
By the time they retired — and due in large part to the fact that Bill is a self-taught, savvy investor — the couple had more than $3 million in financial assets. Bill and Nancy were proud of the financial legacy that they built for their children and grandchildren.
When they had few assets, Bill and Nancy made wills. Each will left everything to the other spouse and to their three grown children if the other spouse died first. As their financial accounts and family grew, they discussed seeing an estate planning attorney to update their wills to include the grandchildren, but they never found the time to revise their estate plans.
Every Sunday is a special day for Bill and Nancy. They go to church in the morning. Then they drive a short distance for dinner with the whole family at their daughter’s home a few miles away.
One Sunday, Nancy dropped Bill off at home after church, because his back was bothering him. She drove by herself to her daughter’s house. As Nancy turned left into her daughter’s neighborhood, she felt a thump on the side of her van. She saw nothing, but stopped and got out. She discovered that her van had collided with a motorcycle.
The motorcycle rider died at the scene of the accident. The police charged Nancy with vehicular homicide. When Bill found out about the accident from his daughter, he had a nervous breakdown.
The motorcycle rider was an engineer in his early 40s, who had a six-figure income and a promising future. His wife died of breast cancer just a few years before, leaving him as the single father of a young child.
Before the accident, Bill and Nancy had tried to protect their assets by purchasing insurance: they had an auto liability insurance policy with a $300,000 per accident limit. They also had a $1 million umbrella policy. Unfortunately, their insurance was inadequate to cover the damage claim filed by the motorcycle rider’s estate and family. Bill and Nancy faced a lawsuit asking for compensation in the full amount of everything they owned.
This tragic story was full of heartbreak for the motorcyclist’s family and for Bill and Nancy and their family as well. It illustrates how catastrophic liability can happen in an instant, at a time when you least expect it.
After the accident, Bill and Nancy consulted with an experienced estate planning attorney to find out if they could do anything to save their financial legacy. Since the potential liability already existed, it was not possible to insulate all of the assets from the legal claim. However, since Bill was not involved in the accident, there was a partial solution.
Sadly, if Bill and Nancy had sought the advice of an experienced attorney before the collision, much of their assets could have been protected through the use of a well-drafted trust.
Asset protection trusts are a special type of trust that protects assets from creditor claims and judgments. To be effective, an asset protection trust must be properly written and established. In Georgia (as well as in other states), numerous state law provisions govern the ability of a creditor or claimant to gain access to assets. As such, creating this type of trust requires an estate planning attorney with knowledge of the applicable Georgia laws and experience establishing asset protection trusts.
To be fully effective in protecting assets, an asset protection trust should be established before liability or claims arise. In the situation Bill and Nancy faced, all of their assets would have been protected if the couple had taken action with an estate planning attorney before the accident happened.
In any situation, the specific facts and circumstances determine whether it is viable to use an asset protection trust.
The description of the situation that Bill and Nancy experienced closely parallels actual events that happened to a married couple who came to Asset Protection & Elder Law of Georgia for assistance. In our practice, we help clients find solutions for many challenging circumstances involving their assets, families, and estates.
In our Cartersville estate planning practice, we provide services to clients throughout the communities northwest of Atlanta, including in Bartow County, Cobb County, Cherokee County, Gordon County, Floyd County and Paulding County. Call us at (770) 382-0984 or contact us through our online form.