Asset Protection Strategies

A variety of asset protection strategies can be combined into a sophisticated asset protection plan based on the client’s objectives.  The 12 most popular asset protection strategies are detailed in this article. All of the strategies are directed at solving the most fundamental asset protection questions:

What are the best ways to organize one’s business and financial affairs to minimize liability and lawsuit risks?

What strategies insure that accumulated wealth and future earnings are insulated and shielded against potential loss?

Offshore Asset Protection Trusts

Offshore Asset Trusts are often used as a component of a sophisticated asset protection plan. There are three planning structures typically established by a client to obtain the advantages of Offshore Trust protection.  For shorthand purposes these different trusts can be referred to as the (1) A Traditional Offshore Trust; (2) A Safety Valve Offshore Trust; and (3) An Offshore Conversion Trust.

Domestic Asset Protection Trusts

An increasing number of states have now enacted laws permitting residents to legally shield their homes, savings and other assets from potential claims of creditors. In 1997 Alaska and Delaware became the first states to allow Domestic Asset Protection Trusts.

Family Limited Partnerships

The Family Limited Partnership (FLP) is an excellent device for providing a high degree of lawsuit protection for family wealth. When used as part of a properly designed strategy, the Family Limited Partnership can also provide significant income and estate tax savings advantages.

California Private Retirement Plans

California allows for the creation of a Private Retirement Plan, which is entirely exempt from judgments and bankruptcy. That is, retirement savings plans which are not IRS Qualified Plans may be protected under state law if certain requirements are satisfied.

Limited Liability Companies

The Limited Liability Company (LLC) has become a powerful tool for accomplishing many asset protection goals.  The LLC is the most versatile and convenient strategy for owning rental property, insulating Dangerous Assets, operating a business, and achieving an excellent level of financial privacy.

Offshore Havens For Privacy and Protection

The topic of offshore havens conjures alluring images of secret bank accounts in exotic locations-far from the prying eyes of the IRS. In this section, we discuss the real world of the offshore havens and the legitimate strategies available for asset protection and privacy planning.

Asset Protection for Physicians

Asset protection planning is the specialty area of the law that addresses many of physicians’ most important concerns, including the best ways to organize one’s business and financial affairs to minimize liability and lawsuit risks and the steps a physician can take to insure his or her accumulated wealth and future earnings are insulated and shielded against potential loss.

The Family Savings Trust

The term Family Savings Trust is a descriptive term for a trust intended to hold and protect assets against lawsuits and business risks. A Family Savings Trust is extremely flexible in form and can incorporate provisions, which combine the features of domestic and even offshore arrangements within the language of the plan documents. All family assets can be held within the trust—but be governed by special terms appropriate for that asset.

Equity Reduction Plans

Equity stripping combined with an Equity Reduction Plan (“ERP”), is a highly effective and sophisticated form of asset protection. Depending on the circumstances and the type of assets involved, an ERP can be used by itself or in combination with other techniques. An ERP is designed to protect equity in real estate or business assets from liability risks.

The Personal Residence Trust

A Personal Residence Trust is a trust specifically intended to hold a principal and/or secondary residence. The PRT is designed to shield the property from lawsuits and judgment liens and to apply appropriate restrictions which protect the property against possible loss. Typically the Personal Residence Trust is a grantor trust so that available tax benefits are preserved. There are different formats and strategies which can be used for creating a Personal Residence Trust, depending upon the particular circumstances of the case.

Asset Protection for Rental Real Estate

The key to properly structuring real estate activities is understanding the concept of inside and outside liability.  Inside liability is the risk produced by the property itself. The first part of the asset protection planning is to insulate and shield an individual from liability arising out of the property to avoid exposing other assets to this lawsuit risk.

Asset protection strategies are multi-layered and can be varied and combined to produce greater and higher levels of sophistication..  An understanding of these foundational legal strategies will assist you in developing an asset protection plan which accomplishes your goals


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