Effective Asset Protection Strategies
Posted by Robert Ingrasci on May 29, 2025
Give Away Assets
- How it works: Transfer ownership of assets to trusted family members or into an irrevocable trust.
- Why it helps: Creditors can’t claim assets you no longer legally own.
- Caution: Ensure the transfer isn’t considered fraudulent and that recipients are financially responsible.
Retitle Assets
- How it works: Change the legal title of property, such as using “tenancy by the entirety” for married couples.
- Why it helps: Protects property from individual creditors of either spouse.
- Limitation: Doesn’t protect against joint creditors.
Buy Insurance
- How it works: Use various insurance policies (e.g., liability, umbrella, malpractice).
- Why it helps: Acts as a financial buffer against claims, reducing the risk to personal assets.
Set Up an LLC or FLP
- How it works: Transfer assets into a Limited Liability Company (LLC) or Family Limited Partnership (FLP).
- Why it helps: Protects assets from personal creditors and facilitates wealth transfer while retaining control.
- Best for: Business interests, real estate, and other valuable holdings.
Establish a Domestic Asset Protection Trust (DAPT)
- How it works: Create an irrevocable trust in a state that allows DAPTs.
- Why it helps: Offers protection even if you’re a discretionary beneficiary.
- Note: You don’t need to live in a DAPT state, but assets and administration must be based there.
Establish an Offshore Trust
- How it works: Set up a trust in a foreign jurisdiction with strong asset protection laws.
- Why it helps: Offers enhanced protection and, in some cases, allows revocation after a period.
- Complexity: Requires careful legal and financial planning.
Legal Aspects
Asset protection must be legally compliant. Fraudulent conveyance laws prohibit transferring assets to avoid legitimate debts. Obligations like taxes, alimony, and child support are generally not avoidable through these strategies.
Conclusion
Asset protection is a proactive and legal way to secure your wealth. However, it must be done carefully and ethically. Consulting with professionals from attorneys to CPAs to financial advisors is essential to tailor strategies to your specific situation and ensure compliance with all applicable laws.
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Bob is an experienced tax professional who devotes his professional time to structuring tax strategies in the areas of compliance, consulting, and planning. Bob works closely with a broad range of high-net-worth individuals and multi-generational families, specializing in the areas of gift and estate planning, charitable gift planning, trust and estate administration, individual taxation, and wealth preservation. Bob serves as a practice leader in the Family Wealth and Estate Planning group. Bob joined Lumsden McCormick in 2008 and was named partner in 2022.