If you’re worried about protecting your assets, you’re not alone. These days lawsuits, foreclosures, and domestic problems like divorce are so common that most of us have considered how we might protect ourselves financially during tough times.
Enter the asset protection industry and asset protection kits. But what are they, and do they work? Learn about the basics here to better understand the issues.
Who Needs to Protect Their Assets?
Traditionally professionals like doctors have been most vigilant about asset protection, and with good reason. People in these professions are in fact more likely to be subject to loss of assets from lawsuits or other problems. However, the fact is that anyone who has assets can lose them to bankruptcy, creditors, divorce, civil lawsuits, tax cases, and other financial challenges.
And if you wait until trouble is on the horizon, it may be too late. This is because protecting your assets by moving them around or trying to create legal structures like trusts when those assets are already in question can be ineffective at best and illegal at worst.
How Can You Protect Your Assets?
Even asset protection experts typically recommend an overall strategy for asset protection that makes use of more than one tool. You can take advantage of both federal and state legal protections for your assets and create a number of different retirement plans and legal structures to help you in this task. This is especially important because the loss of assets you face from something like bankruptcy is different than in the cases of divorce or being sued as a homeowner for injuries to a guest, to provide a few scenarios.
Take retirement accounts, for example. In most types of retirement accounts like IRAs or employer-sponsored plans your assets are safe to a notable extent within the context of bankruptcy court. However, during a divorce your retirement assets will be subject to division by the court.
Aside from retirement accounts, asset protection strategies also include the use of homestead laws, various kinds of insurance, and a variety of trust structures.
Do You Need Professional Help with Asset Protection?
Creating your entire asset protection strategy and filing all legal papers on your own is a roll of the dice. If you have specialized knowledge, say from your work experience as a CPA or tax attorney, you may be uniquely qualified to create asset protection strategies. However, most of us need at least some outside input.
Many professionals like doctors believe that carrying great malpractice insurance is the only asset protection they need, but in most cases experts agree that this isn’t enough. In fact, relying solely on a large insurance policy can hurt you in certain circumstances. Larry Oxenham, senior advisor with the American Society for Asset Protection, comments:
“Liability insurance does provide some protection against lawsuits, but it is limited in its coverage. Juries often award judgments in excess of liability insurance and exclusions in a policy may leave the individual liable. Furthermore, as judgments have increased over the years, relying on more liability insurance isn’t enough. Larger policies are costly and often serve as homing beacons for trial attorneys, who look for the deepest pockets in which to reach.”
Are Asset Protection Kits Legitimate?
Many commentators have roundly condemned asset protection kits as scams. However, a careful review of what’s out there shows that, at a minimum, what one person calls an asset protection kit is not the same as others, and that all asset protection kits are definitely not created equal.
The best kits are not for use by you alone; they come with expert advice and consultation. This highlights a central truth about effective asset protection: it requires extensive research and deep expertise to get it right. For your own part, research the reputation of any firm you consider with the Better Business Bureau. If you do pursue a kit, make sure it includes all of the necessary basics:
- Detailed instructions on how to conduct a complete analysis of existing assets
- Educational materials
- Detailed instructions on proper asset structuring
- Instructions and materials for drawing up basic legal papers (which you can later have checked by an attorney)
- Actual professional support from asset protection experts such as attorneys with specializations in tax law, including ongoing access and consultation.
You will find that most advertised asset protection kits don’t come close to meeting these criteria, but the ones that do can be very useful as you move forward in your asset protection planning.
The Bottom Line
Asset protection is important for anyone with assets, and it is critical to take action before there is trouble brewing. Only the right kind of asset protection kit, along with expert advice, can keep your assets safe from attack.