Asset Protection | What You Need To Know Now

Asset Protection

Asset Protection from Lawsuits

A significant worry of many individuals is the risk of being sued. The thought of becoming involved in a lawsuit is something that looms in everyone’s mind, especially if you own a business and/or are wealthy.

In the event you are faced with a lawsuit the likelihood of protecting your assets successfully in a timely manner is slim to none. Preempting an unexpected attack is vital to the safekeeping of what you’ve worked hard to achieve.  The following are a few strategies to protect your wealth.

Safeguarding Cash

Retirement accounts are a great way to preserve cash. Good news is that in the grand scheme of things, IRA’s and 401(k)’s receive special treatment in a litigious environment.

For example, if creditors are after you for debt settlement and then forced into bankruptcy to satisfy the claim your retirement accounts stand to be the safest vehicle. However, protection isn’t unconditional.

At, they teach you how to properly manage an investment account, regardless of designation. Retirement accounts do remain vulnerable in the event of tax claims from the IRS and custody disputes including child support. Be sure to review your state specific laws to gain a full understanding of the protection provided by the state.

Real Estate

A homestead exemption protects your primary residence from a variety of lawsuits including a loss in the courtroom. Exemption laws vary by state, some with very robust regulations in favor of the owner.

One consideration is the way in which you choose to title your home. “Tenancy by the Entirety” is beneficial in a marriage arrangement as it offers protection to the home if only one of the individuals is sued, allowing the spouse to blockade a potential forced sale.

Business Entities

Utilizing a specific business structure for separation between your personal and business related assets is crucial to protecting what you own. If you are an entrepreneur with a small business and a lawsuit commences with the outcome being negative, everything you own is vulnerable to seizure.

There are multiple business structures available with at least one that will fit your needs. Sole Proprietorships, General Partnerships, Limited Partnerships, Corporations, Limited Liability Companies just to name a few, all having unique benefits.

Insurance Policies

Enacting insurance coverage can mitigate exposure risk to liability. Some have more exposure than others such as doctors, lawyers, and financial professionals who tend to generate more activity with regard to malpractice.

Thus, keeping current on all policies is important. More importantly is purchasing further coverage such as liability or an “Umbrella Policy” which will shield you in the instance all other coverage is exhausted and/or insufficient.

Irrevocable Trusts

Establishing an irrevocable trust for significant holdings is advantageous due to the fact that the assets cannot be retrieved without the review from the trustee.

A trustee can halt distributions if a legal situation arises including a negative judgment. Additionally, creditors cannot seize assets that you have given away or no longer own, a great way to protect valuable assets.

Final Thought

Far from being exhaustive of every technique for asset protection, the former is a great place to start in fortifying your financial asset situation and begin building a sound infrastructure. Each individual’s situation differs as well as state regulations which will have a considerable impact on your decisions for defense.

There is no substitute for setting aside time to sit with a licensed financial planner to discuss the options you have and tailor a plan to fulfill your needs. Remember, establishing a plan for asset protection ends up being much cheaper than having to replace lost assets in result of a lawsuit.