Estate planning is important for everyone in Colorado. There are lots of reasons to do this. For one thing, it helps families to avoid paying unnecessary taxes. For another, it provides families with peace of mind. High net worth individuals should be especially aware of the need to plan their estates carefully.
Complex estates are at higher risk for litigation than simple ones. In today’s climate, it’s especially important to be aware of this. That’s because during economic downturns, data shows that people are more likely to file lawsuits. Right now, many people are out of work. That kind of desperation can lead to some individuals filing lawsuits with little merit.
High net worth individuals should be aware that during recessions, their estates may come under scrutiny. This can be particularly true if they’ve seen profits during a crisis, or if they’ve made money by doing business with a now-bankrupt business. It can be considered fraud to transfer assets in the wrong way if litigation is anticipated. Luckily, there are ways to avoid the issue altogether.
The Smart Moves
Some transfers of property are allowed when it comes to estate planning. These cannot be construed as fraud. Instead, they’re known as reasonably equivalent considerations. Examples of reasonably equivalent consideration include funding a trust for survivors of the decedent, and transferring assets in return for an interest in a corporation.
There are strings attached to these kinds of transfers, of course. For example, when a trust is funded after a death, it must include provisions like a Spendthrift Clause. This kind of clause makes it difficult to transfer rights to assets to a third party. It’s a good idea to have an experienced advisor help create proper trusts.
In this economic climate, it’s important for high earners with complex holdings to have an estate plan in place. Being prepared for the worst can help give your family peace of mind if the unthinkable happens.