(512) 575-2666 | Extension 1 English | Extension 2 Spanish | Extension 3 Chinese jeanie.z@springdalelaw.net

Ashley and Jon’s Story

Ashley and Jon met in their first year of college and eagerly wed within weeks of their graduation. Ashley accepted a job as a dental assistant, and Jon went on to earn his M.D. and became a well-known physician in the area just a few years after they got married. In fact, Jon became so well-known and loved by his patients that he decided to open his own solo practice, which became an extremely successful venture in a very short amount of time. 

As most professionals in high risk professions do, Jon became increasingly worried about potential lawsuits and malpractice claims. He knew he had a lot of assets, all of which could be taken away if a patient or someone else were to file a lawsuit against him. Taking the advice of his ill-advised colleagues, he decided to transfer his assets to his wife, Ashley, for asset protection purposes. Which would’ve been a great plan—had they stayed married. 

Jon’s solo practice had been so successful that he decided to purchase a small family clinic, which he later sold for over $4 million—all proceeds from that sale ending up in Ashley’s name. Due to irreconcilable differences, the once-happy couple decided to file for divorce, and now Ashley had total control over all of Jon’s assets. 

Ashley was upset and, validly, very emotional during the time following the couple’s divorce. She acted on these emotions and tied up all of Jon’s assets for over a year while they sorted things out in the divorce proceeding. He could not pay his car payment or rent during this time, and as a successful and well-respected physician, he endured a lot of mental, financial, and emotional stress. 

When the divorce proceedings came to an end, Jon was awarded 70% of the assets—but the difficulties he experienced during that time could have been easily avoided had he not made the fateful decision to put all of his assets in his wife’s name. 

What Issues Can Arise If I Transfer My Assets To My Spouse’s Name?

There are a few issues when it comes to transferring your assets to your spouse’s name. In the event of divorce or some other kinds of risks that your spouse may engage in as part of his or her life, your spouse can “tie up” the assets and prevent you from accessing them because they are the sole property of your spouse. Those assets are no longer classified as “marital property,” which is key in determining the extent, nature, and amount of assets available to divide between you and your spouse in the event of divorce. Ultimately, you surrender final control of your assets by transferring them to your spouse. 

Furthermore, if an “at-risk” professional such as a physician transfers all of his or her assets to their spouse, that physician would no longer be able to utilize the unified estate tax and gift tax credit. While Texas assesses neither an estate nor gift tax upon an individual’s death, keep in mind that the federal government does levy an estate taxes on estates that exceed a certain value—until 2025, the federal estate tax exemption is $12.06 million for single individuals and $24.12 million for married couples. This means that a couple can transfer up to $24.12 million in cash and assets through their will without having to pay an estate tax. However, if you transfer all of your assets to your spouse solely in his or her name, you will lose the advantage of potentially saving millions by utilizing the unified estate and gift tax credit. 

What Can I Do Instead Of Putting My Assets In My Spouse’s Name?

Fortunately, there are a few options that offer the same kind of asset protection. but without the risks associated with transferring all assets to your spouse. 

  1. Set up a Qualified Terminable Interest Provision (QTIP) Trust.

    You can transfer your assets to an irrevocable trust with QTIP provisions, which provides income benefits to your spouse for life. Upon the death of your spouse, the remaining assets in the trust are distributed to the beneficiaries of your choice—rather than distributed to those chosen by your spouse. 

  2. Establish a limited liability company (LLC).

    You can establish an LLC in order to separate your personal assets from your business assets. This means that the money you put into your business can be reached by creditors, lawsuits, and to fulfill other debts and obligations—but your own personal assets will be protected from such liability. 

  3. Establish a Spousal Lifetime Access Trust (SLAT).

    An SLAT is a type of irrevocable trust that allows you to remove assets from your estate while still maintaining access to those assets during your lifetime. You can utilize the gift tax exemption to fund the trust and transfer assets to the trust for the benefit of your spouse, as well as for other beneficiaries of your choosing. Your spouse, as beneficiary of the trust, is allowed to access the trust assets that are managed by an independent trustee. Thus, you can maintain access to your assets, but prevent those assets from being taken away via a malpractice suit or other lawsuits that you may be subjected to as a high-risk professional. 

Asset protection is a crucial aspect of effective estate planning. Springdale Law Group is one of a few law firms that ensure the well-being and financial future of yourself and your family by assisting in drafting, reviewing, and finalizing your estate plan. As a comprehensive estate planning firm, we are proud to provide this essential service to individuals. Our team is fluent in English, Chinese, and Spanish and can assist with wealth management and estate planning in all 50 states. Don’t leave your own future to chance. Let us help you make a plan that provides you with peace of mind before it’s too late. 

en_USEnglish