Asset Protection And Estate Planning Interplay

Effective asset protection sometimes contradicts proper estate planning. In Florida and some other states property owned by married couples as tenants by entireties is exempt from creditors with judgments against either spouse individually as long as they are married.An asset protection client could have easily and effectively protected property from future legal problems by transferring his property to joint ownership with his spouse. His problem was that his current spouse was his second marriage, and he had children by his first marriage. His estate plan was to ensure his children from a prior marriage ultimately received a substantial portion of his wealth. I pointed out that if he owned property tenants by entireties with his current wife, in the event he predeceased his wife all jointly owned property would be owned by his surviving spouse regardless of what he put in his will or living trust.

At that point, his surviving spouse could leave the property to whomever she wished. She would not be bound by the testamentary intent of the deceased spouse. This person decided not to utilize tenants by entireties because he would lose control over the ultimate disposition of his property and could not protect the interests of his children. His asset protection plan became more complex and expensive as a result.

This was another example that asset protection is always part of overall estate planning. Just as an ill conceived asset protection plan, in this case tenancy by entireties, risks upsetting an important estate planning goal, the opposite is also possible. An estate plan which separates marital property to possible reduce estate tax exposure can take away otherwise desirable protections afforded joint ownership. An asset protection planner should know the client’s estate planning objectives.