It’s unfortunate that we live in an era of baseless or frivolous lawsuits, especially if you are a high-income professional, entrepreneur, or someone who has accumulated significant wealth.  

You need a way to protect your wealth. 

As a wealth manager in Nashville, I’ve met many wealthy individuals and families who often overlook the need to defend their assets, careers, and lifestyles. The good news is you can use various asset protection strategies to shield your wealth from those who might unjustly attempt to claim it. 

In this article, we’ll look at various asset protection planning strategies you can use.

The Aim of Asset Protection Planning

For starters, it’s helpful to know that there’s no formal body of law called asset protection planning. Instead, it’s a series of strategies and tools that are part of the category known as legal risk planning – which itself falls under the broader umbrella of risk management.

Despite being a smorgasbord of strategies, asset protection planning focuses on realizing two main outcomes: 

  1. Discourage and deter lawsuits. You want to eliminate or mitigate litigation before it begins. The most potent asset protection plans we’ve seen are never even contested. Litigation is avoided, or everything is settled before there are any judgments.
  2. Motivate creditors to agree to a settlement that’s favorable to you. If a lawsuit does move forward, you want to minimize any potential loss of wealth. When there are judgments, for example, a powerful plan can make it extremely challenging for a creditor to collect the money from you should the creditor win in court. If a creditor is highly uncertain about the ability to collect, the odds of a settlement that’s favorable to you can rise significantly. Add in the time involved in dealing with the courts and attorneys—and the associated financial costs—and you can see how smart asset protection planning can motivate a creditor to settle or perhaps even walk away with nothing.

Effective asset protection planning isn’t about concealing your wealth.  It’s about being open and transparent to be effective. This approach ensures that creditors or anyone seeking to claim your assets can understand the challenges they would face in a legal battle to access your wealth.  This understanding can significantly increase their inclination to settle or drop the case altogether.  

Key Asset Protection Planning Factors

Some important aspects of asset protection planning to keep in mind as you explore your options include:

  • Stay adaptable with your asset protection plan. It’s crucial that your plan can be modified as needed, adapting to changes in laws and personal circumstances.
  • Employ a variety of asset protection methods. Having multiple strategies in place can significantly bolster your ability to shield your wealth. For instance, certain estate planning tactics, primarily aimed at wealth transfer to heirs, can also offer protection against creditors. So, integrating estate planning can be a smart move in reinforcing your asset protection.
  • Understand the initial and ongoing costs associated with different asset protection strategies. The upfront costs of asset protection solutions include initial planning and implementation. Some strategies have ongoing costs as well. Get a handle on the full range of costs before you move forward to determine whether the benefits justify the expenses.
  • Implement these strategies before you need them – or even think you may need them. Put a plan in place after trouble arises (or even shortly before a lawsuit that seems imminent) with the intent of dodging creditors, and you might find your strategy negated by a judge. Worse, you could be charged with contempt, fraud, or civil conspiracy for engaging in “fraudulent conveyance”.

     

Regular reviews

Like any fundamental component of a wealth management plan, an asset protection plan is not a “set it once and forget it” type of solution. If you have a plan, you need to revisit it regularly to determine whether it’s still correctly positioned to pursue the outcomes you seek.

The reason is that asset protection planning is regularly in flux. Changes in laws and regulations can make existing strategies less (or more) effective while setting the stage for new approaches. Meanwhile, asset protection planning professionals, like the team at Silberman Wealth Strategies are constantly seeking ways to shield your wealth – while creditors and their professionals always look for ways to collect. 

You can’t create an asset protection plan and let it sit in a drawer or on a hard drive for the rest of your life! Commit to revisiting your plan whenever major circumstances change – such as when new tax laws are introduced or your personal or professional wealth situation changes. If you haven’t revisited your plan for more than five years, chances are it’s time to do so. 

Stress testing

If you’re wondering whether your asset protection plan is still structured to pursue your specific goals, consider stress testing it by asking your Nashville wealth advisor to review how it is likely to behave in various scenarios you might face. 

A stress test examines the likelihood of your plan or strategy delivering the outcomes you think it will and want. Stress testing can also be an excellent way to put a plan, strategy, or product you’re considering implementing “through its paces.” 

Ultimately, a stress test can help you determine that the asset protection you have in place is just what you need. Alternatively, it might highlight areas where you could benefit by adjusting your plan. Either way, you’ll know what’s needed to help you shield your wealth from being unjustly taken away from you.

 

ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2023 by AES Nation, LLC.

This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks, and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing. Mitch Silberman is a registered representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and registered investment adviser. Advisory Services offered through Silberman Wealth Strategies, Inc. Cetera is under separate ownership from any other named entity. Mitch Silberman and Silberman Wealth Strategies, Inc. are not affiliated with AES Nation, LLC. AES Nation, LLC is the creator and publisher of the VFO Inner Circle Flash Report.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.