There is nothing worse than spending a lifetime to accumulate assets for retirement only to see them taken away in a lawsuit. Asset protection planning is a very important but misunderstood and underutilized concept.
Classic “asset protection” is the concept of protecting your personal assets from lawsuits. Lawsuits that are most typical are “negligence” suits.
What can cause negligence lawsuits?
- Cell phones—cell phones have become the biggest new issue when it comes to asset protection. There are so many car crashes because people are texting or surfing the web while driving. Lawsuits from negligent driving put ALL of your assets that are not “protected” at risk.
- Property ownership—if you own a home, vacation condo, rental property, etc., you have premises liability issues.
- Professional liability—if you are a doctor, lawyer, CPA/EA/accountant, architect, etc., you have “personal liability” that can’t be shielded through the use of a corporate entity.
Protecting assets from creditors?
The bread and butter domestic asset protection tool is a Limited Liability Company (LLC). The key to using LLCs to protect assets is to 1) make sure it is a multi-member entity; 2) make sure it is set up in the correct state (one that limits the remedy of a creditor to a “charging order”); 3) make sure formalities in formation are followed (don’t just set one up yourself on the internet).
What assets should be LLCs?
- brokerage accounts
- rental property
- vacation condos/homes
- IRAs (depending on the state you are in)
- anything else of value
When using LLCs you should always separate liability assets from non-liability assets. For example, your brokerage account should NEVER be in the same LLC as a piece of property (the property liability puts the brokerage account at risk).
Other creditors, you should protect yourself from?
- IRS—your biggest guaranteed creditor every year is the IRS. To learn about tools you can use to reduce your taxes, click here.
- Stock Market—you are more likely to lose money in the stock market in any given year than being sued for negligence. Click here to learn about safe money tools that will help you protect your money from downturns in the stock market.
- Long-Term Care Expenses—Over 50% of people 65 and older will incur expenses related to long-term care. Click here to learn how you can protect yourself from these expenses.
If you would like an assessment of your asset protection plan or lack thereof, please feel free to contact our office to set up an appointment.
Learn more about asset protection
There is much more to asset protection than is covered on this website. To learn more from one of the industry’s top experts, click on the following to view an educational video.