Asset Protection Basics

Asset protection is a way to safeguard your wealth. There are all sorts of natural and unforeseen circumstances that can pose a threat to the assets you accumulate over your lifetime. These can include death, theft, weather-related catastrophes and illness. If you prepare and plan for these scenarios you can avoid losing your property or possessions, or at least you'll have a feasible means of recovering the value. If you don't put into place asset protection, you may never be able to regain some of what you lose.

The Basics of Asset Protection

There are tools and techniques available for you to legally make your assets unavailable to creditors and to protect your wealth from financial disasters. You can also use those tools to defend against other circumstances that might strip away your wealth. These tools and techniques amount to asset protection, and without it, your assets are exposed. You need to develop an asset protection plan as part of your estate planning. You can create one on your own, or consult with an attorney for help. A lawyer may be necessary if you have assets that are worth more than $1 million, because of the complex tax and legal issues related to high net worth assets. You can also get personalized and specific advice on some of the techniques you can use to protect your assets, such as:

  • Transfer assets to a limited liability company
  • Create an irrevocable or testamentary trust
  • Buy life insurance
  • Acquire homestead property
  • Donate to charity
  • Give gifts to family or other members

These are legal forms of asset protection that are tried and true ways of preserving wealth. There are other ways to protect your assets that are not legal, and could cost you money and the loss of assets in the long term. Stay away from methods that clearly look like tax evasion practices, or are not recommended by your attorney.

Offshore Asset Protection

You have to be cautious when it comes to sheltering your assets offshore, because you don't want to end up being charged with tax evasion. At the same time, there are legal asset protection options abroad. It consists of you transferring your assets to another country. It's legal, as long as you're not trying to hide your assets from the Internal Revenue Service (IRS). You also have to do it in good faith and not for the purposes of hiding your assets from creditors. Countries that offer offshore accounts or “safe havens” do not enforce legal judgments from courts in the United States. That makes it impossible for creditors to attach liens to the assets you transfer abroad, even if they win a suit. Each country has in place confidentiality laws that make it difficult for creditors or others to get information about your assets, including whether or not you have an offshore account.

There are many pitfalls to asset protection to avoid, which is why you should get the help of an expert. Attorneys and financial professionals can help you develop a plan that will preserve your wealth and keep you out of legal hot water.