You’ve worked hard for the assets you have. But without an asset protection strategy, those assets could be seized by creditors, lost in legal judgments, or eaten up by estate taxes.
There are a variety of asset protection strategies out there, and Missouri’s asset protection laws offer you opportunities that many states don’t. Here’s a closer look at how to build your personalized strategy.
How Missouri Law Affects Your Asset Protection Strategy
Generally, an asset protection plan is based on the following:
- Federal law
- Your state’s Uniform Trust Code
- Proven financial strategies
Because each state has unique estate planning laws, creating an asset protection plan here is different from doing so elsewhere. So how does asset protection work in Missouri? Fortunately, Missouri’s asset protection laws include several unique tools that may simplify the process:
Self-Settled Spendthrift Trusts/Missouri Asset Protection Trusts (MAPTs)
Self-settled spendthrift trusts are one of the best asset protection strategies in Missouri for single individuals, although they can be created by married couples, too. A trust is a legal entity you create to “hold” assets, and irrevocable trusts (including self-settled spendthrift trusts) can protect those assets from creditors.
With a self-settled spendthrift trust, you create a trust with your own money for your own benefit to protect your assets. Most states don’t allow asset protection trusts like these.
Missouri asset protection trusts are often a relatively simple and effective way to protect assets from creditors, but there are a number of reasons you shouldn’t rush into creating one:
- They are irrevocable (meaning you can’t change or dissolve the trust once you create it)
- The funds will need to be managed by an independent trustee
- You can’t be the sole beneficiary of funds in the trust
- You generally can’t withdraw assets without the trustee’s cooperation
Missouri asset protection trusts only shield assets from creditors if they’re created according to strict standards in the Missouri Uniform Trust Code. You should always seek legal guidance before creating one.
Tenancy by the Entirety (TBE)/Qualified Spousal Trusts (QSTs)
If you’re married, the legal concept of tenancy by the entirety (TBE) might already be working to protect your assets. Under TBE, a married couple’s property isn’t split 50/50. Instead, both parties own 100% of the property at the same time.
TBE offers a couple of asset protection advantages. If one spouse dies, the shared property goes to the surviving spouse without having to go through probate. If a creditor is trying to collect a debt owed by one spouse, they can’t seize a TBE property.
A qualified spousal trust (QST) is a kind of revocable trust that expands TBE protections. Unlike most revocable trusts, it protects trust assets from most creditors.
For instance, if a TBE property is transferred to a QST while both spouses are alive, the surviving spouse can continue to enjoy protection from creditors.
Identify Which Assets and Liabilities Present the Greatest Risk
Many clients make the initial mistake of thinking their family assets aren’t at risk. When they think of creditors, they imagine a mortgage lender foreclosing on a home or a credit card company suing for defaulted debt. They don’t know that there are far more sources of liability than they realize:
Car Accidents
Car accident lawsuits can impact almost anyone. However, injured people may be more likely to sue wealthy families because they think their chances of success are greater.
Professional Liability
If you or your spouse works in an industry with a high risk of litigation (like medicine), taking steps to preserve assets is crucial. If you don’t, there’s a chance they could be lost in a court judgment.
Divorce
Divorce is more common than it once was. Understandably, many people are concerned that a former spouse may try to claim a significant portion of their assets during divorce.
Premises Liability Lawsuits
If a visitor gets hurt on a property you own, they may file a lawsuit against you. If you own multiple properties, you’re at greater risk for a premises liability lawsuit.
Missouri Trust Planning for Creditor and Wealth Protection
For many people, trusts are an indispensable part of Missouri asset protection planning. If you’re wondering how to protect assets in Missouri, creating an irrevocable trust is often an effective strategy. Missouri asset protection trusts and other types of irrevocable trusts require you to give up some level of control over trust assets.
In return, they offer protection from most creditors. Government agencies may be able to seize assets in an irrevocable trust, but other creditors usually can’t. For example, if you owe federal taxes but refuse to pay them, the IRS can most likely take the amount of your tax liability out of the trust. However, if legal judgments have granted plaintiffs the right to recover funds from you, they still can’t access assets held in the trust.
Using Missouri Business Structures to Separate Personal and Business Assets
If you haven’t already, you should make the separation of your personal and business assets a priority. Part of legal asset protection in Missouri is shielding your personal property from business lawsuits.
Many small business owners run their companies as sole proprietorships. This is generally the simplest option, but it also means that if a client sues your business, they might be able to take your personal assets as well. If you form a limited liability company (LLC) or corporation, your personal wealth will be protected from your company’s future creditors.
Creating a legal entity isn’t the only step you need to take. Opening separate financial accounts for your business and holding onto LLC operating agreements makes it harder for creditors to access your personal assets.
Missouri Creditor Exemptions and Property That May Receive Special Protection
Effective Missouri wealth protection strategies involve understanding exempt assets and how they work. State law protects certain assets from seizure by creditors, and these assets are described as “exempt.”
Missouri’s homestead exemption has historically protected only $15,000 of equity in your home from bankruptcy and other kinds of asset seizures. However, the passage of Missouri HB 1870 raises that amount to $40,000. The new cap goes into effect starting in 2027.
Timing Asset Transfers: Fraudulent Transfers and Creditor Challenges
Many clients don’t realize that the timing of their asset transfers may impact the effectiveness of their asset protection strategies. Specifically, if an asset transfer looks like an attempt to hide money, a creditor may be able to successfully challenge it in court.
When you transfer assets proactively rather than reactively, you’re much more likely to be protected from creditor claims. For example, transferring personal assets into an irrevocable trust when you aren’t facing any legal issues is unlikely to cause problems.
However, if you only create the trust and transfer assets after you’re sued for a car accident, these may be flagged as fraudulent transfers.
Coordinating Asset Protection With Estate, Tax, and Insurance Planning
Many people who ask, “How can I protect my assets from creditors in Missouri?” imagine asset protection as a distinct endeavor. However, asset protection planning in Missouri doesn’t happen in a vacuum.
Comprehensive estate plans always include provisions for asset protection. You probably want your personal assets to go to your family members and other loved ones after your death. But if you don’t have a plan for creditor protection until then, even one lawsuit could drastically change your family’s future.
It’s easy to forget that tax planning is another way to protect assets. Missouri doesn’t have a state-level estate tax. However, if there’s a chance that your estate will be liable for federal estate tax, including tax planning in your asset protection plan could help keep more of your assets in the family.
Building and Maintaining a Missouri Asset Protection Plan
So what are the best asset protection strategies in Missouri? There’s no singular answer that’s right for everyone. And as your asset situation changes over time, your protection plan should, too. Here’s an overview of how the process generally works:
- You inventory your assets and assess your risks
- You choose an attorney to help you create a detailed plan
- Your attorney helps you form LLCs, trusts, and/or legal entities to put your strategy into action
- You transfer assets and retitle them in the name of your trust or LLC (if required)
- You review your plan each year to assess whether you need to make changes
Don’t forget that insurance is a crucial part of any asset protection plan. Doing regular insurance audits can help you make sure that your personal and business assets are adequately covered.
Need Assistance With Asset Protection Strategies?
Unless you’re an attorney, navigating asset protection laws in Missouri can be uniquely challenging. And when it comes to protecting your assets, there’s no one-size-fits-all. The Law Office of David S. Schleiffarth, LLC, takes the time to get to know you and understand your goals before helping you build a comprehensive strategy.
Whether you’re learning about Missouri asset protection strategies for the first time or getting ready to revise your asset protection plan, we’re here for you. Get in touch to schedule a meeting today.
