With increases in the federal estate tax exemption ($5,600,000 for single individuals or $11,200,000 for married couples in 2018) and repeal of the Oklahoma estate tax, estate-tax planning is becoming a non-issue for all but the largest estates in Oklahoma. Instead, a greater concern for most people is protecting their assets from lawsuit judgments.
Why is Asset Protection necessary?
One car wreck, for example, can have a devastating effect on your estate. What if someone is injured in the wreck and sues you? Will your insurance cover it? Your car insurance may include $300,000 in liability insurance; however, if the accident seriously injures or kills someone, a lawsuit judgment could be $1 million dollars or more. In that case, you could be personally responsible for damages above the $300,000 in liability insurance.
In Oklahoma, certain assets are typically protected from creditors: your personal residence, your retirement plans, life insurance, your car (up to a certain value), etc. But general savings, investments, real estate, and other assets are fair game for creditors. One lawsuit can eliminate your life savings. Asset protection is the process of minimizing your liability exposure to avoid losing everything you have worked so hard to gain.
What does Asset Protection look like?
Asset protection comes in many forms, but the most popular is the creation of a Limited Liability Company (LLC) or a Limited Partnership (LP). Once created, this entity would hold some of your assets and "manage" them for you. That way, if a judgment is rendered against you personally, the assets owned by the LLC or LP would not be subject to execution; similarly, if a judgment is rendered against the business entity, your personal assets outside the entity would not be subject to execution. In addition to liability protection, these business entities can offer income tax benefits -- benefits that may be even greater if the GOP tax bill goes into effect.
How can I protect my assets?
For more information about asset protection and the tax benefits of an LLC or LP, contact the experienced Oklahoma City estate planning attorneys at Postic & Bates today for a free, no-obligation consultation appointment.
[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]