What is Asset Protection? - Hundman Wealth Planning

What is Asset Protection?

After working so hard to attain a certain level of wealth, the worst thing that could happen is to lose a substantial portion of your assets. However, this is possible without asset protection. The phrase may sound vague, but asset protection involves a wide variety of techniques to place your assets out of the reach of creditors and other entities that pose a risk to your long-term financial prosperity.

Let’s break down the basics of asset protection so you can understand how it works and why it’s so important.

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How might my assets be at risk?

Your assets can come under fire from many directions. Lawsuits, whether personal or business-related, divorce, tax issues, and debt owed to creditors can all pose a situation where your assets may be taken from you. Many of these circumstances can sneak up unexpectedly, at which point it is too late to shield your assets. Being proactive about asset protection will give you peace of mind knowing your cherished assets are out of reach of those who might try to harm you.

How do I protect myself?

The most important thing to keep in mind is that asset protection is a preventive measure. It’s not a last resort method you can reach for in a bad situation. Just like you can’t go to an insurance carrier and start a car insurance policy to cover the accident you were in earlier that afternoon, asset protection measures must be taken before trouble is on the horizon. If you try to shift assets around when they’re already at risk, judges will reverse what you’ve done and you might face legal or financial penalties.

Having a strong asset protection plan in place will minimize your time spent dealing with the legal system in the event of a suit. With your assets sufficiently guarded, settlements will be preferable to long, costly legal battles for all parties involved. Having your assets safely tucked away will give you leverage against potential litigants. However, you’ll still want to make sure you have extensive liability insurance in addition to your asset protection plan. If you are sued over the steps taken to shield your assets, the insurance company will be on the hook for your legal costs.

Working with wealth management professionals will ensure every measure taken to protect your assets is done within the parameters of the law. This is key because many ways of shifting assets around are illegal. Asset concealment, tax evasion, bankruptcy fraud, fraudulent transfer, and other charges are all possible if your maneuvers aren’t done by the book. You’ll want to make sure your wealth management advisor is properly certified and possesses the deep knowledge of many areas of law necessary to devise a bulletproof asset protection plan.

How does asset protection work?

Essentially, asset protection involves doing as much as possible to make your assets exempt from seizure. The exact methods vary depending on your unique circumstances. Commonly used strategies include the following:

  • Setting up trusts
  • Separating business assets from personal assets
  • Creating new investment vehicles
  • Changing the way assets are titled
  • Altering asset portfolios
  • Setting up insurance plans
  • And more!

Whatever methods are used, it is important to keep the overall plan as simple as possible. If you do end up facing some sort of lawsuit, you’re bound to face questions about the position of your assets. If you’re unable to even explain how your assets have been maneuvered, the judge may feel that you’ve done something fraudulent.

Contact Hundman Wealth to arrange a consultation with an expert who will be able to decide the best course of action for protecting your assets.

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