10 Genius Ways to Protect Your Money

Mark Henricks  Thu, June 16, 2022,

SmartAsset: 10 Asset Protection Strategies for 2022

Asset protection strategies can protect investors, professionals, business owners and those with significant assets from loss due to lawsuits, creditor claims and other risks. This often involves moving assets from the owner’s personal control into various legal entities in order to separate them from claims against the owner. While not necessarily simple, inexpensive or guaranteed to stop all claims, asset protection can be an important part of a financial plan. A financial advisor can help identify the assets and strategies appropriate to your individual situation.

What Is Asset Protection?

Asset protection consists of a set of legal techniques used to protect assets owned by individuals and businesses from claims arising from lawsuits, debts and taxes. For instance, these strategies can limit the amount a driver can lose if someone is injured in an automobile accident in which the driver is at fault.

Asset protection is most useful for people with significant assets. Occupation also plays a role here. Business owners, especially those with employees, are among those most likely to be subject to lawsuits for damages. Others at risk include real estate investors and highly paid professionals such as physicians, especially surgeons and obstetricians.

Asset protection can also shield assets from loss due to divorce. In that sense, anyone who is married may be a candidate for asset projection.

Asset protection is useful but has its limitations. It may involve significant cost and complexity and is a lower priority for people with few or no assets. And asset protection can’t shield against all taxes or various liens such as mechanics liens.

10 Asset Protection Strategies

Asset protection is highly individualized. Every asset protection plan is likely to be different in some aspects from all or most other asset protection plans. However, there is a finite set of tools that can be used. Here are 10 of the most important:

Plan ahead. In most cases, when a lawsuit is filed or a tax bill is levied it is too late to try to protect assets. For best results, asset protection should be done before there is a need for it.

A limited liability company (LLC) is one of the most common, simple and effective asset tools for protecting assets. Creating an LLC and transferring real estate, vehicles and other assets into the LLC can shield them from lawsuits or other claims against the owners of the LLC. LLCs can also manage taxes by avoiding double taxation on corporate profits.

Asset protection trusts are irrevocable trusts that serve as repositories for assets removed from the control of the original owner. Assets transferred to an asset protection trust are often protected from creditor and lawsuit claims against an individual or business. International asset protection trusts based in offshore havens such as the Cook Islands and Nevis offer even more protection.

Family limited partnerships let owners set themselves up as general partners of partnerships owning assets they wish to protect. Family members can be made limited partners. This is an effective way to manage estate taxes.

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