Let’s face it—money, property, and investments are hard to earn and easy to lose. Whether from lawsuits, creditors, or just life’s unexpected turns, your assets are always at some level of risk. That’s why so many people look into asset protection strategies.
Of course, asset protection has both advantages and disadvantages that you need to consider in order to select the strategy that’s right for your situation. In this article, we’ll explore some notable asset protection pros and cons to help you decide if you should establish a wealth protection strategy:
- What Is Asset Protection?
- Asset Protection Pros and Cons: A Brief Overview
- How to Decide if Asset Protection Is Right for You
What Is Asset Protection?
Asset protection is the process of organizing your finances, property, or business structures in ways that make them less vulnerable to lawsuits, creditors, and other financial threats. Think of it as placing a shield between what you own and anyone who might try to take it.
Common asset protection strategies rely on the use of several tools, such as irrevocable trusts, limited liability companies, and land trusts, to work. Using these tools, an asset protection professional can reduce how much of your wealth is at risk if you ever lose a lawsuit.
Asset Protection Pros and Cons: A Brief Overview
The pros and cons of asset protection tend to vary from person to person. What feels like a disadvantage to one person may be negligible to another. Keep that in mind as you read through the following list of asset protection disadvantages and advantages:
Asset Protection Advantages
- Asset safety: When you hire a professional to set up your asset protection plan, you can rest easy knowing your wealth is beyond the reach of creditors. The strongest wealth defense tools, like offshore asset protection trusts, can even defend against a judge’s orders.
- Control: Many wealth protection measures allow you to maintain control over your assets without putting them at risk. Achieving this level of control while mitigating risk does require professional help, but the outcome is more than worth the cost.
- Divorce protection: Many people mistakenly think that a prenuptial agreement will keep their money safe during a divorce. Unfortunately, these agreements can easily be undone by a well-trained lawyer. What those lawyers can’t breach, however, are the protections afforded by offshore asset protection trusts.
- Estate-planning benefits: Asset protection strategies don’t stop working when you pass away. In fact, tools like trusts can be set up to smoothly transfer from you to your loved ones after your death. Using trusts and other asset protection strategies as part of your estate plan can help your family avoid probate costs and ensure your wealth is distributed according to your wishes.
Asset Protection Disadvantages
- Complexity: Setting up an asset protection strategy that actually keeps your wealth safe involves numerous tools, some of which are based overseas. To properly establish your trust, it’s wise to enlist the help of a professional, like those at Asset Protection Planners.
- Costs: Asset protection isn’t free. Many of the top strategies cost several thousand dollars to set up. Once your plan is in place, you will need to pay annual maintenance fees, which amount to a few thousand dollars per year, to maintain your protection.
- Time sensitive: Most asset protection plans must be set up long before a lawsuit. While there are tools that can defend against lawsuits on short notice, the best strategies need to be set up at least two years prior to a lawsuit.
- Ongoing effort: Many plans aren’t “set it and forget it.” You need to work with your asset protection planner to ensure that your strategy remains compliant with changing laws.
- Potential for fraudulent conveyance rulings: In some cases, your creditor may bring a fraudulent conveyance claim against you. This is the main way that creditors can recover assets from within a trust. Fortunately, this is not typically a criminal issue, and most offshore trusts are near-impervious to these claims.
How to Decide if Asset Protection Is Right for You
When looking at asset protection pros and cons, the question isn’t just “Is it good or bad?” It’s, “Is this worth it for me?”
In our opinion, everyone can benefit from asset protection. However, you may not need to put top-of-the-line offshore asset protection tools in place. For instance, if you own a small rental property and worry about tenant lawsuits, a simple LLC might give you enough security at a reasonable cost. On the other hand, if your net worth is in the millions and you work in a profession with constant legal risk, complex offshore strategies may be worth exploring.
Ultimately, asset protection advantages usually far outweigh potential disadvantages. Even if you make a mistake and select a tool that offers more protection than you need, the cost of that error is far smaller than the cost of not having asset protection when you need it.
Choose the Right Strategy With Help From Asset Protection Planners
Trying to understand the pros and cons of asset protection without professional help is overwhelming for most people. Thankfully, the team at Asset Protection Planners can help you set up a plan that effectively guards your wealth against the threats you’re likely to face.
Start safeguarding your wealth today! Set up a free consultation with Asset Protection Planners.
