In today’s lawsuit-prone environment, one of the smartest things you can do is protect your wealth before it’s under threat. By setting up the right asset protection plans long before legal trouble is on the horizon, you can save yourself the hassle of costly court proceedings and keep your money safe from creditors.
At Asset Protection Planners, we’ve spent decades developing strategies that stop lawsuits long before they start. In this article, we’ll show you how to avoid lawsuits by sharing six protection tips:
- Put Your Wealth in the Right Legal Structures
- Take Advantage of Asset Protection Trusts
- Don’t Engage in Bold Displays of Wealth
- Work With an Asset Protection Professional
- Stop Owning Property in Your Own Name
- Keep Your Life as Private as Possible
1. Put Your Wealth in the Right Legal Structures
If you’re still keeping your wealth in your name or running a business as a sole proprietorship, stop. These actions do nothing to protect you from lawsuits. A lawyer or creditor can easily run an asset search to identify exactly how much money you have, and then sue you for every cent that they locate.
To prevent that nightmare scenario, manage your wealth using limited liability companies (LLCs) or corporations. Both of these business structures put a wall between your personal and professional liabilities. For example, if you are the owner of an LLC, and the company is sued, your creditors can only go after the assets owned by the company. Your personal assets remain off limits.
When someone sues you, there are also provisions in standard LLC law that protect the company and its assets from seizure. In most states, the LLC needs more than one owner to enjoy this protection. Only a few states, such as Nevada, Wyoming, and Delaware, statutorily provide asset protection for the membership in a single-member LLC and its holdings.
Corporate structures carry another key advantage: privacy. Before a lawyer starts a lawsuit, they often look through public records to see just how much you own. If you keep a portion of your wealth in a corporate structure, attorneys may struggle to trace those assets back to you. When a lawyer can’t see how much you have, they’re far less likely to sue you, as it won’t be as lucrative for their settlement-based contingency fees.
To gain asset protection through corporate structures, you need to establish your company correctly. You can do this by setting up your company in a state with advantageous privacy laws, like Nevada or Wyoming. Once you’ve selected a state to form your LLC or corporation in, hire a lawyer to draft the articles of formation. If you attempt to draw up the articles yourself, there’s a good chance that an experienced lawyer could pick them apart during a lawsuit, opening you up to personal liability.
Divide Your Assets Using LLCs
You’ve probably heard the phrase, “Don’t keep all your eggs in one basket.” That old adage is one of the best asset protection tips. If you have several business ventures, you need multiple company structures. Placing all your companies and their assets inside one corporation or LLC opens the door to a lawsuit that can ruin every business you run. By splitting up your business holdings across multiple corporate structures, you create a situation where the worst-case scenario is the total loss of one company, rather than several. Don’t let a lawsuit against one business drag the rest of them down. Setting up corporations and LLCs is cheap. Lawsuits are expensive.
Offshore Corporations and LLCs
The U.S. is among the most lawsuit-prone countries in the world. Keeping your assets inside a U.S.-based company is better than doing nothing, but still not the very best you can do. Instead of waiting for a lawsuit to hit your U.S. company, why not operate your business offshore? Offshore LLCs, like those based in the Caribbean island of Nevis, have some of the strongest LLC asset protection laws in the world.
If someone wants to sue a Nevis LLC member for their interest in the company, they first have to post a $100,000 bond with the courts. In the unlikely event they get a charging order against your interest in the LLC, they still cannot take the LLC from you or touch the assets it holds. Plus, a charging order judgment in Nevis only lasts three years, compared to 20 years in the United States. All of the above protections even apply to single-member LLCs.
2. Take Advantage of Asset Protection Trusts
Any conversation about how to avoid lawsuits is incomplete without mentioning offshore asset protection trusts (OAPTs). These trusts, specifically the ones based in the Cook Islands, are the strongest asset protection tools on the planet. To make these trusts as strong as possible, they must be:
- Drafted by an experienced professional, like those at Asset Protection Planners
- Helmed by a trustee living in the Cook Islands
- Funded with an offshore bank account
When establishing a Cook Islands trust, we always ensure it meets the above conditions. To date, not one person who has set up such a trust with our guidance has ever lost the money they placed into it.
It’s worth noting that offshore asset protection trusts most effectively protect liquid assets, like cash, savings accounts, and stock portfolios. Assets like real estate are subject to the laws of the country where they are located, which makes them harder to protect.
Offshore Asset Protection Trust Safety Considerations
When providing asset protection tips about offshore trusts, people often bring up safety concerns. It’s easy to understand why. Most people don’t like the idea of their assets and the trustee in charge of them being so far away. However, there’s actually nothing to worry about regarding offshore banks or overseas trustees:
- Offshore bank safety – Global Finance regularly ranks the world’s 50 safest banks. The most recent edition of that list contained only one U.S. bank—and that bank barely made the list, coming in at number 44.
- Offshore trustees – The Cook Islands are remote, sparsely populated, and low on natural resources. To make up for its lack of a natural industry, the country has made finance, specifically wealth protection, its core economic pillar.
Given the importance of financial security to the Cook Islands’ economy, the country goes to great lengths to maintain its reputation. These lengths include a strict regulatory board that watches over trustees like a hawk. If a trustee ever shows any sign of wrongdoing, the board will step in to relieve them of their trustee powers.
To add even more safety, all trustees must be bonded by insurance companies. In the extremely unlikely event that you end up with a bad trustee, your money is protected by their mandatory insurance policy.
3. Don’t Engage in Bold Displays of Wealth
Want to know how to avoid a lawsuit? Try to look like you aren’t worth suing. Someone who lives in a giant mansion and drives a bold luxury car is obviously rich. However, if that same person were to live in a nice house and drive an inconspicuous luxury sedan, they would attract less attention. In the world of asset protection, attention is one of your biggest enemies.
Now, if you’re thinking, “I worked for all this money and should get to spend it how I please,” you’re not wrong; however, that mindset comes with risks. For example, if you rear-end someone while driving a Ferrari, they’re more likely to sue you than if you happened to be driving a Lexus.
It’s also worth remembering that avoiding bold displays of wealth doesn’t mean staying away from owning nice things. There are luxurious items that most people won’t immediately identify as high-end. The real strategy is to use your wealth in ways that won’t raise anyone’s suspicions about your actual wealth. Here are some ways you can still live luxuriously without putting yourself at risk:
- Make upgrades to your current home, rather than moving into a mansion.
- Stick with comfortable and powerful luxury sedans rather than eye-catching sports cars.
- Wear designer items without logos, and save the pricey watches for business meetings and nice dinners.
- When traveling, keep your public posts to a minimum, and definitely don’t talk about buying first-class tickets.
- Stay private on social media in general. Even if you invest in quiet luxury, opening up your life to the public can undo your well-crafted image.
By following the above asset protection tips, you can live in extreme comfort without putting yourself at risk.
4. Work With an Asset Protection Professional
Even if you know how to avoid lawsuits, and understand which tools can help you do so, you cannot implement them without help from an asset protection professional. Corporate structures and trusts must be crafted by someone who has experience filing articles of incorporation and trust agreements. Making a mistake on these documents opens the door to potential lawsuits, undoing your efforts to keep your assets safe.
5. Stop Owning Property in Your Own Name
Real estate is one of the most valuable investments you can make. However, these investments should never be made in your own name. Real estate ownership records are public information. If you own the deed in your name, a lawyer can easily discover that you own a significant amount of real estate. Once they have that information, it’s a matter of time until they find someone who can file a frivolous lawsuit against you and topple your real estate empire.
To keep your name out of public records, consider creating a land trust. These trusts are strictly used to help create privacy of ownership for real estate. When you use a land trust, it appears as the deed holder in public records, so even if you control the actions of the trust, a lawyer will see the name of the trust on the property deed. Just by taking your name off the deed, you make yourself a significantly less appealing target to any contingency fee lawyers looking for a quick win.
If you want privacy plus a bit of protection, you can place each property in a separate LLC. This way, you have privacy through the land trust, plus the liability protections of an LLC. And, by putting each piece of property into a different LLC, rather than having them all in one, you limit the potential damage of a lawsuit to a single piece of property.
6. Keep Your Life as Private as Possible
Today, social media has gone from a fun way to spend time on the internet to something that people constantly monitor throughout the day. If you’re not careful about what you post, you could inadvertently reveal something about your true net worth, or worse, your asset protection strategies.
Fortunately, posting on social media isn’t something you have to do. While it’s nice to share pictures of your vacations and celebrate major life milestones, consider keeping these moments private. The more of your life you share with the public, the more likely it is that someone will notice the level of luxury you enjoy. If you catch the attention of a jealous person or a contingency fee lawyer, you could be unwittingly giving them the ammo needed to lodge a lawsuit against you.
The best strategy for protecting your privacy is to avoid using social media altogether. If that’s not feasible or is undesirable, consider setting your profile to private. There’s no need for your private account to be shared with everyone on a social media platform.
Even if you move your profile to private, remain cautious about what you post. Never talk about your asset protection strategies online, and don’t share information that could indicate just how much wealth you have. Following these social media asset protection tips is just one more way you can create financial privacy and avoid the attention of lawyers.
Call Asset Protection Planners: We Know How to Avoid Lawsuits
While asset protection tips help keep lawyers off your back, preventing lawsuits entirely requires professional help. The team at Asset Protection Planners has spent decades learning how to avoid lawsuits, and can even keep your wealth safe if you ever end up facing litigation.
If you’re ready to start protecting your wealth from contingency fee attorneys, creditors, and other threats, contact us now. Schedule a free consultation to secure your assets today!
