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Asset Protection Isn’t Just for the Wealthy

Happy couple employs asset protection strategies despite not being wealthy

4 Ways to Protect Your Money

Regardless of your net worth, it’s important to protect the assets you’ve worked hard to build. While some asset protection strategies are designed to meet the needs of the ultrawealthy, other strategies are important for everyone, as they help protect against potential creditors, litigation and taxes.

Following are four key asset protection strategies everyone should consider.

#1 – Insurance

One of the most common asset protection strategies is insurance. Based on your particular financial situation, it may make sense to implement a combination of the following types of insurance:

  • Auto insurance
  • Umbrella insurance
  • Health insurance
  • Malpractice insurance
  • Professional liability insurance

Umbrella insurance is an especially effective asset protection strategy, because it provides coverage for claims not covered by other types of insurance. It also provides additional liability coverage above your other policy limits, which can help protect your assets from unexpected claims, such as injuries to others, property damage, lawsuits and personal liability situations.

#2 – Asset protection trust

An asset protection trust is a type of irrevocable trust used to protect assets from creditors. Although typically used by high-net-worth individuals, these trusts also benefit those who work in professions that place them at an increased risk for lawsuits, such as real estate developers and healthcare professionals.

Asset protection trusts also play a key role in estate planning, because they remove assets from the grantor’s estate. Doing so can help minimize your beneficiaries’ tax exposure, ensure a smooth transition of assets to your heirs and protect your loved ones’ privacy.

#3 – Prenuptial agreement

No one likes to consider the possibility that they may one day get divorced. However, the reality is that in the United States, 42% of marriages end in divorce.1 An effective way to protect yourself and your assets from the financial pitfalls of divorce is by establishing a prenuptial agreement. In addition to providing some control over how marital assets are split in a divorce, a prenup also:

  • Encourages pre-marriage financial conversations, helping you and your spouse-to-be get on the same page
  • Streamlines the divorce process
  • Protects you from any debt your spouse brings into the marriage
  • Protects your family and business

#4 – LLC or FLP

Another way to protect your assets is by transferring them to a limited liability company (LLC) or family limited partnership (FLP). Both types of legal entities allow you to retain control over certain business assets while protecting them from creditors.

Could you use help implementing strategies to protect your assets? Creative Planning is here for you. Our teams of wealth managers, estate planning attorneys and insurance professionals work together to help ensure your wealth is protected. For more information, schedule a call with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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