What is Asset Protection

Asset protection encompasses a range of strategies and planning techniques aimed at legally securing individual or business assets from various threats, including legal judgments, seizures, taxes, creditor claims, or undesired beneficiaries such as former spouses.

Key strategies for asset protection may include:
Trusts
Limited Liability Corporations (LLCs)
Umbrella insurance
Prenuptial agreements

Asset protection is particularly vital for individuals in high-risk professions or those who own high-value assets. Many asset protection strategies work by transferring property into a separate entity, and they often double as effective estate planning tools.

Federal law typically regards qualified retirement plans as “exempt” and inaccessible to creditors. Some state laws also offer protection for other assets, including personal property, your primary residence, life insurance policy benefits, corporations, and annuities. For instance, a state homestead exemption can safeguard your primary residence from creditors and, in some cases, property taxes. However, not all valuable assets are shielded. Creditors, lawsuits, or even family members seeking a portion of your estate may successfully claim those assets.

What is the best form of asset protection?

An asset protection trust is an irrevocable trust designed to safeguard assets from creditors. These trusts can be either domestic (within the U.S.) or offshore (held outside the U.S.). While domestic trusts are not permitted in all states, offshore trusts typically incur higher setup costs.

Asset protection trusts can serve as a viable alternative to prenuptial agreements, particularly for individuals with high net worth or those in professions exposed to higher litigation risks, such as doctors and real estate developers.
Similar to other trusts, they remove assets from the grantor’s estate, potentially lowering estate taxes. Additionally, asset protection trusts can help reduce state taxes.
An umbrella insurance policy supplements existing coverage, such as homeowner's or auto insurance, by increasing your liability limits to protect additional assets.
For healthcare professionals or service providers, malpractice or professional liability insurance can safeguard certain assets in the event of a lawsuit.

Limited Liability Companies (LLCs) and Family Limited Partnerships (FLP)

Transferring assets into a limited liability company (LLC) or a family limited partnership (FLP) helps keep them distinct from your personal property. Both options enable you to maintain control over the assets while providing protection from creditors.

Retitling Real Estate

You can shield property from creditors by transferring it to another individual; however, be cautious about who you transfer it to, as they may expose the property to their own creditors. Utilizing a trust for property transfer may offer greater legal protection.

Prenuptial Agreements

To safeguard your assets prior to marriage, consider drafting a prenuptial agreement. This legal document can help ensure your assets are protected in the event of a divorce, secure inheritances for children from previous marriages, and even shield one spouse from the debts of the other.

If you wish to engage in asset protection for yourself and your family or for your business, please fill out the form below and an asset protection attorney from our office will contact you.

What is Asset Protection?