Protect Your Assets

Asset protection is a financial planning strategy with the goal of making assets less vulnerable to creditors. Asset protection focuses on laws that provide favorable protections against creditors, such as those that govern structures like trusts and LLCs.

Asset protection strategies primarily work by removing assets from your name. Why? When a creditor is awarded a judgment against you personally, any assets attached to your personal name—such as a house or car—can be subject to a lien, giving the creditor legal right to that property to pay off the debt. However, when assets aren’t in your personal name, they’re much more difficult for creditors to access.

In addition to making your assets less vulnerable to creditors, taking assets out of your name has a few other significant benefits as well.

• Lawsuit Deterrence: A solid asset protection strategy can prevent lawsuits from occurring in the first place. If people are considering suing you, they’ll do an asset search to see if you’re worth the expense of a lawsuit. They’ll pull your credit and see what you own and search public county assessors and DMVs. If they find plenty of assets in your personal name, they’ll know that a lawsuit has potential for big payoff.
• Identify Theft Prevention: Thanks to the rise in major data breaches and mismanagement, the odds are good that you have personal information floating around the dark web. If you have assets in your name, it would be easy for thieves to use your stolen personal information to manipulate your assets. However, it’s much harder for someone to use your personal information to hijack assets that aren’t attached to your name but instead to a trust or business entity.

While personal identity theft is much more common, people can impersonate companies as well. Learn how to avoid corporate identity theft.

Some of the most common asset protection strategies involve trusts, FLPs and LLCs:

• Trusts: By putting assets in an irrevocable trust, the assets are in control of a trustee. On one hand, this succeeds in removing the assets from your name. On the other hand, you no longer have any degree of control over the assets and cannot revoke the trust or change the terms of the trust. Additionally, laws regarding trusts vary widely. Only a few key states (like Delaware and Nevada) have especially favorable trust laws, making foreign or offshore trusts more popular.
• FLPs: Family Limited Partnerships are business entities mostly used in estate planning. Any assets owned by an FLP are in the name of the business, not the individual partners. While FLPs have some beneficial tax properties, they require all partners to be family members and can be fairly complicated. It’s also important to realize that general partners in an FLP lack limited liability, so a lawsuit against the FLP itself could result in a general partner losing any assets in his or her name.
• LLCs: LLCs are one of the most common and popular business entities. Assets in an LLC are out of your personal name, just as they are in a trust or FLP. However, while trusts require trustees and FLPs require family members, LLCs are less dependent on others. You can run a single-member LLC yourself or share member or management responsibilities with people of your choosing.

For a side-by-side comparison of trusts and LLCs, check out our Trusts vs LLCs page.

We recommend LLCs because they’re simple. You can go crazy with offshore strategies, trusts, FLPs, and tons of companies all running each other. While more complicated, multi-layer asset protection strategies offer certain advantages, they are so hard to maintain that many people give up on them after a few years, resulting in a massive waste of money and effort.

LLCs, on the other hand, don’t cost a lot of money to form and maintain. You don’t need a lawyer to form an LLC. Best of all, an LLC is just a normal business entity type that is easy to understand.

LLC protections are as strong as the LLC laws in the state. Note that state laws—and court interpretations—may change with time. For instance, in the early 2000s, a common asset protection strategy was to establish a Florida LLC. In 2010, however, the Florida Supreme Court decided in Olmstead v. FTC to award creditors of an LLC’s members access to the LLC’s assets. This decision ruined an entire asset protection strategy for thousands of people. Since then, many people have abandoned Florida in favor of a Wyoming LLC or a Delaware LLC. These states not only have beneficial state laws for asset protection but also strong laws that protect the LLC from member issues such as a debt.

Learn more about protecting LLCs from member liabilities on our LLC Asset Protection Strategies page.

The key takeaway is that any asset protection strategy is only as strong as the current laws and rulings. Whether you put your assets in an LLC, a trust, or an offshore account, you may find a judge someday that doesn’t like what you’ve done and get a ruling that makes all the corporate structuring and shuffling you’ve done for years completely worthless.

This doesn’t mean you shouldn’t take steps to protect your assets. However, the best asset protection strategies are simple, cost-effective, and flexible—like an LLC.

Asset protection doesn’t have to be overly complicated. When it comes to protecting your wealth and minimizing your liabilities with LLCs, there are a few core ideas that should guide your actions:

• Do not own things personally.
• Own your vehicles in an LLC name to keep your personal name off DMV records.
• Own your home in an LLC name to keep your personal name off county assessor records.
• Own your investments in an LLC name.
• If you own a business, have one business entity that transacts business with your clients, and one for the assets of the business. The asset-holding LLC charges the business entity that is out there every day to use its assets. In theory, the business entity doing the work doesn’t really own anything.

Just forming an LLC isn’t enough to protect your assets. You’ll need to take advantage of every opportunity to minimize the amount of information you give to the world. Below are steps you can take to maximize your LLC asset protection.

1. Find a company you can trust with your personal contact details (like Northwest).
2. Form an LLC in a state that does not publish the members or managers’ information online (like Wyoming or New Mexico).
3. Start your first LLC as a personal investment LLC that will own some stocks.
4. Hire a mail forwarding service you trust so you don’t get your mail at your residence.
5. Open an LLC bank account where you reside (or use a Wyoming LLC bank account).
6. Set up a stock brokerage account and take a small gamble on the stock market. This gives your new LLC some real purpose and a chance to earn income.
7. Set up a new company email address. We recommend getting a domain name and using the domain registrar’s emails service so you have a professional-sounding email address.
8. Set up a new phone number under the LLC’s name with either a cheap pre-paid phone or a VoIP service phone number.
9. If you have contracts in your personal name, start updating them with your LLC company name, mail forwarding address, new company email address and new company phone number.
10. Use your new LLC to enter into agreements (as the LLC, not personally).
11. Start transferring assets into the LLC.

We recommend taking it slow. Try letting us help you form a Wyoming Close LLC. We form Wyoming LLCs for $325, including state filing fees and registered agent service to help minimize sharing your personal address.

Prefer another state? We form LLCs in every state and the District of Columbia. An LLC is easy to maintain, and we can form one for you today!

ORDER Your LLC today!