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.
Establish an limited liability company: 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.
Establish trusts for added security: 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.
Explore family limited partnerships: 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.
Properly title your property: Holding assets as tenants by the entirety can prevent creditors from seizing jointly owned assets if only one spouse has a liability. This type of ownership structure is recognized in many states and is particularly helpful in cases where one spouse is exposed to potential claims, providing a level of asset separation that other titling methods may not offer.
Shelter assets in retirement accounts: Retirement funds offer significant tax advantages and are generally exempt from bankruptcy under federal law. They may also be safe from claims resulting from lawsuits and debts, although state laws on this vary.
Have the proper insurance: Insurance is a fundamental asset protection strategy. When liability insurance covers a claim by someone who gets injured at a residence or workplace, the insurance company pays it, not the policyholder. Life insurance can ensure that survivors are financially taken care of, and plans that build up cash value may also be protected from claims by creditors.
Consider an annuity: Annuities can be shielded from creditors and other claims, but this varies by state. Some states provide no protection while others protect limited amounts and a few offer unlimited protection.
Look to homestead protections: Homesteads are often protected by state laws. The amount of the protection varies widely, with some states providing no protection and others shielding unlimited amounts of home equity from claims.
Gift assets strategically: Gifting assets is a strategy that involves transferring ownership of assets to family members or other beneficiaries. By legally gifting assets, you reduce the size of your estate, which can make it less susceptible to claims.