[music] 00:04 S?: Welcome to Aging Insight with your hosts, John Ross and Lisa Shoalmire. This program is brought to you by... [music] 00:36 John: Welcome to another episode of Aging Insight. I'm John Ross, here with my co-host Lisa Shoalmire and on Aging Insight, we're here to talk about things that are important to people as they get older and we want you to be able to live life on your terms. We want you to try to avoid nursing home care if you can. We want you to avoid becoming a burden on others. We want you to avoid going broke in the process of getting older and trying to pay for yourselves, and we know that you can do it. We know that you can accomplish these goals, but we also know that you need knowledge. You've got to have information as you navigate through these years, and that's what this program is all about. That's why we're here, and today we're gonna be kind of talking about that last element, that avoiding going broke. There's lots of ways, Lisa, that you're assets can be in jeopardy. A lot of times, and in some of the other episodes, we've talked about nursing home costs, the cost of in-home care providers and assisted living, and things like that. And those are certainly some big costs out there, but there can be some other costs that you may not have right now that you could have at some point in time in the future. 01:56 Lisa: Yeah, so one of the things that we always look at is there can be outside dangers and risk to your assets, but sometimes there can be some inside dangers and risk to your assets. We have done an episode before on some of the scams that we see seniors fall victim to, but today we wanna talk about maybe some of the choices that seniors make when they are trying to deal with keeping their savings intact that, sometimes, they need to make some adjustments. Maybe how you've always done things, maybe it's time to adjust and do something different. So, today we're gonna talk about asset protection and, you know John, one of the things that seniors don't wanna give up is driving. 02:46 John: Oh yeah. Driving is one of those things that, you turn 16 or 15 or whenever it was that you've got your driver's license and when you remember back to that time, that was your first moment of independence. Now, of course, anybody who has a teenage driver around knows that the chances of a teenager being in a car wreck are pretty high. They're just not very good drivers yet. What a lot of people don't know is that the point where you reach the age of 85, statistically, your chances of being in a car wreck are the exact same as a 16-year-old driver. And, of course, this varies. Everybody's situation is different, but knowing that you're increased risk of being in an accident... Unfortunately, if something happens during that accident and somebody is injured, maybe even severely injured, the chances of things like law suits, those things can impact your assets, even when you weren't expecting that. You probably have car insurance and things like that but if it's a bad enough accident, there could be somebody out there who was injured in that car wreck that's looking at your assets as a way to recover from those car wreck damages. And of course, that's not the only thing, Lisa, we've got kids. A lot of times we see people who have put their kids on bank accounts and those kids might have their own problems. 04:31 Lisa: Well, sure, we think that putting children on bank accounts is an easy solution to make sure if anything ever happens to you, that child can make sure your bills get paid. The problem with that comes in is if that child... You may trust that child, that child's never gonna touch your bank account, but what if that child gets into a car accident, then your bank account, your assets, your nest egg of savings can be reached by that injured plaintiff who your child was in an accident with. And there it goes, right out the door. 05:11 John: Right, some people have even maybe added their child as a co-owner on a vehicle. They might even have other inner dealings. We see a lot of people whose retirement income comes in the form of things like rental properties, where you have third parties who are occupying houses that you own. Those people might be injured or something could happen at that house and those people might try to sue you. Oftentimes, as people get older, they participate in charitable organizations. They might be on the board of directors for a charity, and sometimes even people who are involved in charities, if something goes wrong with that charity, they might even try to hold the board of director's responsible. 06:04 Lisa: Well, I think that comes under the category of maybe no good deed goes unpunished. [laughter] 06:09 John: I think that's probably right. So, the point with all of this is that depending on your situation, there may be things that you wanna do to protect what you have. But when you're trying to figure out what you should protect and what you don't need to worry about, the first part of all of this, is figuring out what's at risk and what's not at risk. And when we get into this sort of thing, a lot of times, we're looking at it, for example, if you were sued and somebody did get a judgment against you, what could they get? Could they get your home? Could they get your retirement? Could they get your Social Security or something like that. And so, what we're gonna do is we're gonna take a quick break and when we come back, we're gonna start out by talking about what assets are at risk and which ones are protected under the law, so stick with us, we'll be right back. [music] [background conversation] [music] 09:18 Lisa: Welcome back to Aging Insight, I'm Lisa Shoalmire and I'm here with John Ross and today, our topic is asset protection. As you glide into your retirement years, we want to make sure and keep your savings and your assets intact so that you can enjoy those years and pay for the services and the care and all that you need as you get older. But there is a lot of threats out there to keeping your assets intact and in our first segment, we were talking about just all the different places that those threats can come from. Those threats may come from your own actions, such as if you have a car accident. Those threats may come from activities you're involved in or your children using your assets, such as vehicles or things in a manner that create some liability, but you know what? The law suit boogeyman out there, even if someone files a law suit, is successful in getting a judgment against you, there's still a few more hoops to get through before they can reach certain assets that you may have. And these are assets that are determined by the state, to be assets that are not available to a plaintiff to satisfy judgments. And I wanted to talk about those so we'll know what's off the table, what is generally protected and then we'll talk about some methods that we can use to protect the assets that may be able to be reached in those situations. 11:00 John: Yeah, and so when we're talking about this sort of thing, the first question is what could they get and what could they not get? And of course, this is gonna be very dependent on state law. So, with our viewers, we've got folks in Texas and we've got folks in Arkansas, and maybe you're just in visiting and just happen to catch the show and you're from Tennessee. Well, a lot of these laws are gonna be very dependent on your particular state. So, for example, a lot of times, people are concerned about their home and if there is some liability out there, one question that I've heard a lot is, "well, could they get my home?" Well, for most states, there is a homestead exemption. There is an exemption out there that says that your house, where you live, is protected from a judgment creditor. In fact, for our Texas viewers, Texas has probably the strongest homestead law in the country. 11:58 John: The only one that comes close is Florida, but it's a very strong protection of an unlimited value based on whether you live in town, you can protect 10 acres and if you live out in the country, you can protect up to 200 acres, but that's very strong. And there similar provisions in Arkansas, although there are some limits in the amount of how much house you can have and still be protected. But the house is one of those things that's generally not reachable by the average judgement creditor out there. The same thing often goes with certain types of retirement accounts, things like pensions, social security, even in some cases IRAs and 401 Ks. Again very dependent on state law, but in many cases, no matter what is in an IRA, it is protected from that judgement creditor. 12:54 Lisa: Well and to continue, most states will allow you to protect things, such as at least one vehicle for each driver in a married couple. And also, states allow you to keep all of your furnishings and personal items that you need to get by with everyday, appliances, things like that. And one of my favorites, John, is that under Texas law, you're able to keep some long guns, firearms and some hunting dogs. 13:28 John: That's right. [chuckle] 13:29 Lisa: Right. But the idea though is that if you do get into that car accident, there is just certain assets that... The state feels like it's just necessary for you to have shelter, for you to have transportation, for you to be able to get by in life, that they wanna protect from a judgement creditor, because you don't wanna see people out in the streets or without a mode of transportation if they do get caught up in some of these liability. 14:00 John: That's right. And one of the final things that we'll mention is life insurance. Generally, life insurance contracts are exempt from judgement creditors and again, depending on your state depends on the amount, but in many states, unlimited amounts of life insurance. Now the interesting thing about this is that you might have, for example, an investment like an annuity. An annuity is actually a form of a life insurance contract. They're governed under the life insurance rules. And so often times, annuity contracts are also exempted from being attackable by a judgement creditor. So, when you think life insurance, you might think "oh, well that's the amount that somebody gets when I die." But there's lots of different types of life insurance contracts, annuities being one of them. So from a judgement standpoint, annuity contracts also can be protected. Now, the big question in all of this, Lisa, is what about all of these other things? 15:10 Lisa: Well, that's right. If you're blessed to have more than the basics of a home and a car and a little bit of retirement savings, perhaps you just have a regular investment account at one of the securities brokers in town. If that account is not a specific qualified retirement vehicle, then the monies in an account like that are reachable by judgement creditors. 15:38 John: Right. So with these, we're talking about checking, your savings, your CDs, your stocks and bonds. The rental properties are investment properties that you might have. Maybe you got some timberland or some old farmland that you inherited from grandpa. All of those things, those are the types of assets that are unprotected and oftentimes, some of these things like particularly land holdings or real estate, it's very easy for that judgement creditor to discover those. They can just get on the internet and look up your name and find whether or not you own certain real estate and things like that. So, the first thing in figuring out what to do in your situation is figure out what you have that might be subject to that creditor out there. 16:28 Lisa: Well that's right. A lot of times you'll hear the term, "Well, you know, I don't have to worry about that because I'm 'judgement proof'." And what that means is that's a person who they've looked at their assets and basically they have those basics and that's it; the house, the car, their personal belongings, maybe retirement account. And so they don't have any other assets that would be susceptible to being used to pay a judgement. So that's what judgement proof means, but a lot of folks as we got into our retirement years, we've either accumulated a few other things. The big one, John, can be if you are a joint owner with a brother, sister, cousins on some land that maybe you've inherited along the way and you've been in a car wreck and you've created liability, then your interest in that land could be susceptible to satisfying that judgement or if you're joint with someone else and they have a creditor, then the land could have to be sold in order for your proportion to be paid to your creditor. 17:38 John: Right. So what do you do? And that's why you're watching. Give me some answers, John. Well you know, when it comes to asset protection, usually, the key is getting those dangerous assets, the assets that might be subject into some form of vehicle that is protected. And usually this comes in one of two forms. Either by using a company, or by using some form of trust. And so I think what we'll do, Lisa, is let's take one more break and when we come back, we'll talk about how to use trusts or companies as a way to protect those assets. [music] [background conversation] [music] 20:00 John: Welcome back to Aging Insight. Today we're talking about asset protection and we've talked about what the risks are. We've talked about what assets are susceptible to a judgment creditor out there, if you were to ever get sued. Now, the real question is, how do you protect yourself from these sort of things? Well, one simple way is insurance. Most people have car insurance and they might have home owners insurance, and if they do have some business dealings, they might also have some business insurance. If they're on a non-profit organization, they might have some sort director or office or liability insurance. But there's another type that oftentimes is relatively cheap, and that's what's called an "umbrella policy". An umbrella policy is a type of insurance that only kicks in if your other insurance isn't enough to pay. For example, if you were in a car wreck, and let's say that you've got $200,000 worth of limits on your auto policy, and then you've got a judgement against you for $300,000. It's more than what your auto limit policies are. 21:13 John: Well, once your auto insurance pays out all of that policy, then an umbrella policy can kick in and it can cover that extra, that little bit. And you'd be surprised, these type of policies are usually very, very cheap. 21:30 Lisa: Yeah, they really are because if you think about it, your primary insurance, your auto, your home owners, is really taking the brunt of any risk. An umbrella policy knows that it's fairly unlikely, unless you just have a big issue, that they'll ever have to pay anything. These type policies are usually issued on an annual basis, for just a couple hundred bucks. It's certainly an investment worth looking at. 22:00 John: That's right, especially if you've got assets that need protecting, that's what insurance is all about. The other thing is to use some form of... The next thing at least, is to use some form of corporate entity. And these can come in lots of different ways. There are limited liability companies, there are corporations, there are limited partnerships. And all of these different corporate entities are designed to shield the owner from certain types of liabilities that that company creates, but also to protect the assets of that company from liabilities that the person creates. For example, if you had, maybe you've got that... Like Lisa talked about, you've got that farm land with your brother, and you both manage it, you both take care of it, and you've kind of had this... It's like a partnership where y'all share and do combine work, but, like Lisa talked about, if somebody were to sue you, they can get to your interest. 23:04 John: On the other hand, if for example, that farm was in something like a limited partnership or a limited liability company, because of the way the laws are set, while that judgment creditor might be able to get a judgment against you, what they wouldn't be able to do would be get through that company wall and into the assets. In other words, they couldn't get to the farm that you and your brother have. Using companies in certain situations can really be pretty valuable. 23:40 Lisa: Well, one of the things we see this a lot in, is a lot of hunting leases, hunting clubs. If someone owns the land, then they put that land into a business form, because they're gonna have a lot of members and guests out on that property. And it's a way to protect the property, as well as protect the individual from personal liability. 24:00 John: That's right. Now, the other way to do this is the use of trusts. And we've talked about trusts on the show before. And all trusts are is a stack of paper that once you sign it, you have created a legal entity. But trusts, depending on how they're structured, can provide certain types of protection from third-party attacks. 24:24 Lisa: Yeah, so people a lot of times say "Oh, I've got to be wealthy to have a trust." Well, a trust is just simply a tool. And if we're looking at protecting those acreages of timberland or a substantial investment account, then a trust is a very modest expense to go to in order to shield those assets. 24:52 John: Right, and there's some dual purpose here. For example, if I had some rental properties or maybe I had some timberland, and I wanted to protect that in case I ever got sued, I might create a trust and have those lands held by that trust, but there might be some secondary benefits. Again, this is Aging Insight, and as I get older and maybe five, or 10, or 15 years down the road and maybe I've gotten to a point where I need some sort of assistance with my long-term care needs, that same trust that I used to shield my assets from creditors, might could also be structured in a way that it keeps it from being a countable resource when you're applying for government assistance like Medicaid to pay for that nursing home care. So, now you've protected it in case you ever get sued, but you may have also protected it from the cost of your own care. 25:55 Lisa: Well, and the deal about trust is that there's a lot of different kinds, and they all can be customized for your needs and your purposes. But my warning would be, this is not just something you can go on the internet and pull down a trust form, and it'd be the trust that's going to do for the purpose that you want it. So you need to talk to a professional about what your needs are. 26:20 John: Right, and the same thing goes when we're talking about companies and things like that. There's certainly lots of ads on TV about forming a company, just call this number and stuff. Get good advice when it comes to this, because it can be very, very technical. And often times, if you miss even the slightest little thing that can blow it all. So, get good advice, but consider your assets and consider what might be at risk. And take some steps to protect those things. 26:47 Lisa: Yeah. So you've just about come to the end of another edition of Aging Insight, and I hope you have gotten some information that you can use and it's made you think about the assets and how you wanna preserve them, and stretch them out through your retirement. And that's what we're here to do. 27:04 John: Yeah, and if you ever have any questions, feel free to ask those on our Facebook page which is facebook.com/aginginsight. And of course you can listen to us live on the radio every Saturday at noon on 107.1. So that's for watching and yeah, we'll see you next time on Aging Insight. 27:27 S?: Thank you for joining us for this week's Aging Insight program with John Ross and Lisa Shoalmire. This program is made possible by... [music]