Dolf Dunn Wealth Management, LLCDolf Dunn, CPA/PFS,CFP®,CPWA®,CDFA

Private Wealth Manager11330 Vanstory Drive

Suite 101Huntersville, NC 28078

704-897-0482dolf@dolfdunn.comwww.dolfdunn.com

Asset Protection for Women: Beyond Insurance

February 25, 2014

As women continue to work and earn money, becomethe main breadwinners, and run their ownbusinesses, it's important to take measures to protectyour lives, businesses, and simply the things youown. That's why asset protection planning hasbecome so vital for women.

Asset protection planning is the process of arrangingyour financial affairs to prevent or at least minimizethe risk of your assets being used to satisfy claims offuture creditors or claimants. Asset protection is notintended to hide assets, defraud creditors, or evadethe payment of taxes. In fact, if a court finds that yourasset protection plans were made with the intent todefraud, it will disregard those plans and make theassets available to creditors.

Why is asset protection planningimportant for women?Women, now more than ever, need to consider assetprotection planning because:

• Women live longer than men and will likely needtheir money to last longer

• At some point in their lives, women may have tomanage their own finances due to divorce,widowhood, or remaining single

• Many women are successful business owners• A good asset protection plan can help you achieve

financial security and independence, and give youan opportunity to have enough money to providefor your comfortable support and that of yourdependents

Insurance as part of your assetprotection planOften, the simplest way to protect assets is by shiftingthe risk to an insurance company. This shouldgenerally be your first line of defense. However,insurance may not provide all the protection youneed, or it might not be available.

Other asset protection strategies generally involve

transferring legal ownership of assets to otherpersons or entities, such as corporations, limitedpartnerships, and trusts. The logic behind shiftingownership of assets is fairly straightforward: yourcreditors can't reach assets you don't own.

C corporationsYou might be a business owner, or thinking aboutstarting a business. If so, choosing a business entityis an important decision. One option is a Ccorporation. The law views a C corporation as aseparate legal entity. As such, business assetsowned by a C corporation are considered separatefrom your personal assets, which will generally not beat risk for the liabilities of the business.

However, protection from liability may be lost if thebusiness does not act like a business, such as whenthe business acts in bad faith, fails to observecorporate formalities (e.g., organizational meetings),has its assets drained (e.g., unreasonably highsalaries paid to shareholder-employees), isinadequately funded, or has its funds commingledwith shareholders' funds.

Caution: A number of issues should be consideredwhen selecting a form of business entity, including taxconsiderations. Consult an attorney and taxprofessional before shifting assets to a corporation orother business entity.

Limited liability company (LLC)An LLC is a hybrid of a partnership and a Ccorporation. An LLC is generally taxed like apartnership with income and tax liabilities passingthrough to its members (and not double-taxed as witha C corporation), but it is viewed as a separate legalentity and can be used to own business assets,protecting your personal assets from business claimsagainst the LLC. While the legal formalities are basedon state law, the legal requirements to form andmaintain an LLC are usually not as involved as thoseassociated with a C corporation.

Generally, an assetprotection strategyshould dissuadepotential creditors frompursuing an actionagainst you, and protectyour personal assetsfrom being seized tosatisfy a creditor'sjudgment.

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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for anyindividual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performancereferenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with aqualified tax advisor.

Securities offered through LPL Financial, Member FINRA/SIPC

Professional corporation (PC), limitedliability partnership (LLP)Many professionals, such as lawyers, doctors,dentists, and accountants, face liability for damagesthat result from the performance of their professionalduties. While no business structure will protect youfrom personal liability for your own professionalactivities, states have enacted laws allowingprofessionals to join together to form professionalcorporations wherein all participating corporatemembers are of the same profession. An alternativeform of business entity suitable for professionals isthe LLP. Both an LLP and PC protect you from theprofessional mistakes of your partners. That is, if oneof your partners is sued for negligence, and the PC orLLP is also named in the lawsuit, the partner suedmay be liable personally for any judgment, but the PCor LLP should protect your personal assets from thereach of any judgment creditor of the entity.

Family limited partnership (FLP)An FLP is a limited partnership formed by familymembers only. Assets that you own, such as aclosely held business or any real estate (other thanyour residence), may be placed in the partnership.Generally, a creditor can only obtain a charging orderagainst the FLP, which allows the creditor to receiveany income distributed by the general partner (who isusually a family member). It does not allow thecreditor access to the assets of the FLP. Thus, acharging order is not an attractive remedy to mostcreditors, and consequently, its limitations mightconvince a creditor to settle on more reasonableterms than might otherwise be possible.

Protective trustsProtective trusts are intended to protect your assetsand/or estate from creditor claims, lawsuits, anunwanted beneficiary, or other threats. Generally,protective trusts work to pay income to the beneficiaryyou name in the trust. The trust also can be set up topay out for a specific purpose, such as educationexpenses, or care for a beneficiary with specialneeds. In fact, you can name yourself as thebeneficiary to ensure payment of income whileprotecting the trust assets from creditors and lawsuits.

Your creditors are only able to reach assets in thetrust to the extent of your beneficial interest in thoseassets. If you have no right to the assets of the trust,your creditors can't reach them. On the other hand, if

you're entitled only to trust income, that's all yourcreditors can seek to attach.

Irrevocable trustsFor an irrevocable trust to be effective as an assetprotection tool, you must not be able to revoke orchange the trust once you establish it. This meansyou can't dissolve the trust, change beneficiaries,remove assets from the trust, or change its terms. Butbecause you relinquish control over the assets youplace in the trust, they're generally beyond the reachof your creditors as well. In addition, by addingspecial language to your trust through a spendthriftclause, you can further protect trust assets from yourbeneficiaries' creditors.

Caution: A revocable trust, unlike an irrevocabletrust, generally does not protect trust assets fromcreditor claims since you have control over those trustassets.

Domestic self-settled trustsThe laws in a few states, such as Nevada, Alaska,and Delaware, enable you to set up a domesticself-settled trust. You can create this type of trust,transfer assets to the trust, and name yourself asbeneficiary. The key to a self-settled trust is that itgives the trustee discretion over whether or when todistribute trust property or income to beneficiaries.Creditors can only reach property that the beneficiaryhas a legal right to receive. Therefore if you, as a trustbeneficiary, don't have access to trust property, yourcreditors will be unable to reach it as well.

Offshore (foreign) trustsMany foreign countries have laws that make it difficultfor creditors to reach trust assets held in that foreigncountry. In order for a creditor to reach assets held ina foreign or offshore trust, a court must havejurisdiction over the trustee or the trust assets. A trustthat is properly established in a foreign countrygenerally does not allow jurisdiction of a U.S. courtover the trustee. A U.S. court will be unable to exertany of its powers over the offshore trustee. For acreditor to assert a claim against trust assets, the suitmust commence in the foreign jurisdiction, with alawyer licensed to practice in that foreign country. Inaddition, the creditor will probably have to post a bondwith the foreign court. Taken as a whole, theseobstacles have the general effect of deterringcreditors from pursuing actions in the foreign court.

Many professionals, suchas lawyers, doctors,dentists, andaccountants, face liabilityfor damages that resultfrom the performance oftheir professional duties.Both an LLP and PCprotect you from theprofessional mistakes ofyour partners.

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