If you’re worried about keeping your wealth safe from lawsuits and creditors, you’ve likely started to spend some time researching asset protection. During your research, you probably found dozens of professionals all giving you conflicting advice on what you should do to keep your money secure.
With so many different opinions on how to safeguard your wealth, it can be tough to know what to do and where to begin. That’s exactly why we’ve put together this guide detailing how to start an asset protection plan! With our help, you’ll learn everything you need to set your plan in motion:
- How to Start an Asset Protection Plan
- Dividing Your Assets Is Key When Starting an Asset Protection Plan
- Your Budget Matters
- How Your Risk Level Impacts Your Plan
- Planning Should Start Before You Face Any Legal Threats
- Conduct a Moral Examination as Part of Your Plan Setup
How to Start an Asset Protection Plan
Once you make the decision to protect your wealth, the first step is to take stock of your assets. This will involve adding up the total value of everything you have, or at least everything you plan to protect. Some items you should absolutely include in this assessment are your real estate holdings, bank accounts, and investment portfolios.
Here’s something to keep in mind while you tally up your possessions: Protecting savings and liquid assets is different than protecting the family home, future income, and real property. When you assess and consider your portfolio, you can compartmentalize each asset and its value. During the plan setup stage, you can limit the risk and liability of various assets by using distinct legal tools.
Second, assess your risks and liabilities. Doing so will help determine how strong of an asset protection plan you require. Generally, people who work in professions with an increased lawsuit risk, such as doctors and real estate investors, need stronger asset protection.
Once you’ve tallied up your assets and assessed your risks, it’s time to hire an asset protection planner. These professionals can help you start an asset protection plan that is tailored to both the assets you have and the risks you face. They’ll also let you know if your risk assessment was flawed in any way.
Dividing Your Assets Is Key When Starting an Asset Protection Plan
Your liability decreases when you separate your assets into various legal tools. Conversely, when everything is tied to your name, it’s all at risk. If someone names you as a defendant in a lawsuit, the plaintiff’s representation can easily find the assets you own and claim them after winning a judgment.
Without legal separation through some kind of asset protection, you are vulnerable. It’s like the old saying goes, “Don’t put all your eggs into one basket.” If you choose to retain ownership over all of your assets, you’re essentially leaving your wealth out in the open. Protection begins when you use legal tools that separate risk and liability from your wealth.
Your Budget Matters
When an asset protection plan is in the design stages, your personal preferences, budget, and comfort level with various tools will play a big role. When using legal entities to protect assets, there are annual expenses, reporting, and operating formalities for each. If you have a smaller budget or are protecting a relatively modest asset pool, you should ensure that your planner only looks at options that account for those restraints.
Additionally, you should make your planner aware of any personal preferences regarding your asset protection plan. Some people are more comfortable with multiple entities that offer greater legal separation of risk and assets. Others are willing to assume some liability to reduce the burden or cost of managing their plan.
How Your Risk Level Impacts Your Plan
You and a consultant can work together to determine your financial plan’s complexity based on your risk profile. In general, a plan’s complexity should increase in proportion to the risk that one’s business, occupation, lifestyle, or personal situation poses to one’s assets.
When performing a risk assessment, it’s worth involving your planner in the process. Not every asset shares the same degree of potential liability. For example, assets like motor vehicles and real estate have inherent liability, meaning that the condition of the asset can directly lead to a lawsuit. These asset types should always be kept in separate structures from bank and investment accounts.
Conduct a Moral Examination as Part of Your Plan Setup
When creating a plan, make sure you consider whether the plan is ethically and morally sound. Asset protection planning should be compliant with all laws and should not be implemented with the intent to defraud someone who has made a fair request to satisfy obligations that you knowingly incurred. Asset protection plans are purely intended to keep you safe from frivolous lawsuits and unwarranted threats.
Planning Should Start Before You Face Any Legal Threats
It’s natural to believe that seeking legal help is a reactive process. Most people only hire legal assistance when they need to respond to or defend against something. In the case of asset protection, however, you should assemble your plan long before you’re facing legal scrutiny. Timing is critical to creating legal protection of your finances, and the sooner you set up an asset protection plan, the better. Courts can challenge and negate a desperate transfer of assets in the face of a threat, but they have a much harder time undoing the protections afforded by a trust that has been in place long before a lawsuit started.
Call Asset Protection Planners to Establish a Strategy
The best asset protection plans require the input of a knowledgeable professional. That’s exactly what you’ll get when you work with the team at Asset Protection Planners. Our group of experienced wealth defense planners has spent decades developing ironclad asset protection measures that really work. In fact, since our founding, not a single one of our Cook Islands trust clients has lost money to a creditor.
If you’re ready to start an asset protection plan and still aren’t 100% certain about where to start, get in touch. Contact us today for a free consultation and start securing your wealth before any threats emerge.
Beginning an Asset Protection Plan FAQ
How do I start an asset protection plan?
You can start an asset protection plan by getting a clear picture of what you own and what could threaten it, and then using proven legal tools to place those assets in safe legal “containers” before problems arise. This process should always be done with the help of an asset protection planner.
Part of a true asset protection plan requires understanding that malpractice insurance, liability insurance, and a large savings account are not enough by themselves. Insurance policies have exclusions and limits, and lawsuits can target personal assets that sit in your own name, such as investment accounts, rental properties, or business interests. A proper plan uses legal structures like LLCs and asset protection trusts to change the ownership of those assets and make them less vulnerable.
An asset protection professional will typically begin by conducting a thorough assessment of your situation before recommending any structure. During the assessment, your planner will look at your current asset mix, your profession and industry, history of risk, family situation, and long-term asset protection goals. During this step, you’ll need to list out items such as real estate, bank accounts, brokerage accounts, business interests, and any other significant property you own so the planner can group them by risk and importance. It is common to prioritize shielding high-value personal assets that you want to preserve for family or retirement, while also separating higher-risk assets like rental properties or operating businesses into protective entities.
Once your assets and risks are mapped, the planner selects and designs the legal tools that will become the backbone of your protection strategy. Limited liability companies (LLCs) can hold business or real estate interests so that liabilities related to the company are less likely to jeopardize your personal wealth.
If you need to protect significant value or have a high risk of being sued, your planner may recommend an asset protection trust (APT). These trusts can be created so that certain assets are owned by a trust in a favorable jurisdiction instead of directly by you. This makes it more difficult for local courts to reach your assets and still allows you to benefit from the assets inside the trust. These tools work best when they are implemented before you face any specific claim or lawsuit, so timing is critical for both effectiveness and legal compliance.
Step-by-Step: How to Start an Asset Protection Plan
- Decide what you most want to protect, such as your home, retirement savings, or business interests, and why you want to protect those assets now rather than later.
- Create a written inventory of real estate, bank accounts, investments, business interests, valuable personal property, and any other items of significant value you own today.
- Consider professional risks like malpractice or contract disputes, personal risks like car accidents, and financial risks such as personal guarantees or business loans.
- Review whether you are mixing personal and business accounts, and gather information on existing entities, such as corporations or LLCs, you already use.
- Gather bank statements, deeds, business formation papers, loan documents, and insurance policies so a planner can quickly understand your current structure.
- Choose a qualified asset protection planner from a firm that openly describes its planning process, uses established legal tools like LLCs and asset protection trusts, and focuses on preventive planning rather than asset recovery.
- Share your asset list, risk concerns, and goals with your asset protection planner so they can begin evaluating your situation and answering your questions.
- Work with the professional team as they review what you own, how it is titled, and what types of claims you may face.
- Discuss the use of LLCs, asset protection trusts, and related entities so you understand how each one contributes to shielding specific assets.
- Ask your planner which states or international jurisdictions will be used for your entities and trusts and why those locations provide stronger protection from local courts.
- Go through the proposed plan in writing to confirm which assets will move into which entities, how control will work, and how the structure fits your long-term objectives.
- Work with the firm to properly form LLCs, draft trust agreements, and complete any related legal paperwork so the structures become effective.
- Transfer assets into the new structures by retitling accounts, assigning business interests, and deeding properties into the appropriate LLCs or trusts.
- Keep a clear record of new entity documents, trust paperwork, and asset titles so you always know where each asset is held and how it is controlled.
- Revisit your plan with the professionals when you add new assets, change careers, sell a business, or experience major life events so your protection stays aligned with your current situation.
