Forming an LLC in Washington in Washington can be a strategic move for safeguarding your assets. While the process involves fees and requirements, the benefits far outweigh the initial investment. Crafting a comprehensive operating agreement is essential to establish the structure and operations of your LLC. Additionally, understanding the implications of taxes and filing an annual report are integral aspects of LLC management. Whether you're considering a single member LLC or an anonymous LLC, the protection of your assets remains paramount. In this article, we delve into the intricacies of Washington asset protection and provide insights into maximizing the benefits of LLC formation.
Assets are items with economic value that a person or a corporation owns or controls. There is an expectation that assets will provide future benefits. Assets can include fixed, short-term, and intangible assets. Financial investments are also considered assets. Examples of assets include the following:
Asset protection is part of financial planning to protect your assets from legal claims against you. This can include litigants filing lawsuits and creditors. Creditors can come after your bank accounts, properties, businesses, personal residence, investment accounts, and properties. Asset protection aims to maintain your estate and allow you to pass it on to your desired beneficiaries or heirs. This will preserve your wealth and assets even after your passing.
There are many ways you may lose your assets. There are more obvious ways of losing your assets, but for the more subtle ways, you may need the aid of your lawyer to delineate and plan. Below are some examples of ways individuals may lose their hard-earned assets.
Divorce: One of the most common ways to lose your assets is by obtaining a divorce. If no agreement states how you will divide your assets in a divorce, your assets may be especially at risk. This can also occur when you pass to one of your beneficiaries if they also undergo a divorce. For instance, if proper safeguards were not placed earlier, a property you provide to one of your beneficiaries may be split in half and given to their ex-spouse during a divorce.
If you are at risk of many malpractice lawsuits, maybe because of your work, it is crucial to have some asset protection. Small business owners should also strongly consider protecting their assets against bankruptcy. Insurance is often not enough as it only covers part of what you will lose.
Beneficiaries may put your assets at risk either by overspending or no fault of their own. Creditors or predators may seek out their inheritance for whatever reason. The good news is that by taking the initiative and just a little more effort in estate planning, you can protect your assets even after you pass, which goes to your beneficiaries.
Any person that owes significant amounts of money to creditors puts their assets at risk if strategic action is not taken in advance. Asset planning is critical in risk management, and you can avoid losing your hard-earned belongings through just some careful planning.
There are many potential benefits from asset protection trusts. These include those that are listed below.
State homestead protection laws prevent people from losing their homes when undergoing foreclosure or changes in their financial status. In Washington, the homestead exemption is $40,000 and includes land, mobile homes, and improvements.
If you have a life insurance policy where the beneficiary is not yourself, the proceeds and avails are exempt from creditor claims.
Any annuity contract, a financial contract between a person and insurance company that provides retirement income or death benefits, is also protected from creditor claims of up to $2,500 per month.
Creditors can also not claim Employee Retirement Income Security Act (ERISA) benefits and Individual Retirement Accounts (IRAs). ERISA benefits are a welfare plan, program, or fund that an employer maintains to provide, including medical, surgical, or hospital care.
Finally, proceeds from disability are exempt.
Outside of the state's legal protections, you should highly consider taking additional action to protect assets, especially those not covered by Washington State law.
A trust is one way to protect your assets. It is an agreement between the creator and trustee. The trustee manages the assets included in the trust on behalf of a third party you have selected who directly benefits from it, your beneficiaries.
This type of trust can be created by any individual who needs government benefits in the future or someone who requires assistance with asset protection. This can protect your assets and prevent you from being wiped out by lawsuits or bankruptcy.
This trust holds your assets while you can continue to use and control them. Upon the Grantor's death, the trust passes assets to your assigned beneficiaries per your instructions. The estate tax applies to this type of trust, but assets passed to an heir through this trust are exempt from estate tax. Creditors can also access these assets.
This trust is created during the Grantor's lifetime but does not become effective until their passing. This trust type safeguards your property against creditors of the beneficiaries. It protects your assets from becoming depleted.
Asset protection can be a complex field to navigate with evolving laws and regulations. The rules for Washington asset protection can be complicated. Hiring an expert that has experience working specifically around Washington asset protection laws can help ensure that your financial protection strategy is satisfactory and preserve your wealth through retirement and legacy.