Asset Protection Isn't Just for the Wealthy: What You Should Know

When you hear the words “asset protection,” you might picture wealthy business owners, doctors, real estate investors, or others with significant assets and a high risk of being sued.

But asset protection planning isn’t only for the wealthy. Most of us spend years building financial security — purchasing a home, saving for retirement, growing a business, or setting aside money for our families. Asset protection planning is about considering what could put those assets at risk and taking appropriate steps to protect them.

What is Asset Protection Planning? At its simplest, asset protection planning involves structuring your finances and property in ways that can help protect them from potential creditors and legal claims. Lawsuits and financial problems aren’t limited to people in high-risk professions. An unexpected car accident, business dispute, foreclosure, medical crisis, or liability involving rental property could potentially result in a significant financial claim. The goal of asset protection planning is to identify those risks before a problem occurs and determine whether there are legal strategies available to help reduce your financial exposure. Timing is important. Asset protection generally needs to be done proactively. Once a lawsuit, creditor claim, or other financial problem has arisen, your planning options may be much more limited.

Start With the Basics: Insurance

One of the most important - and often overlooked - asset protection tools is adequate insurance.

Depending on your circumstances, that might include:

• Homeowners insurance

• Automobile insurance

• Business insurance

• Professional or malpractice insurance

• Long-term care insurance

• An umbrella liability policy

Having insurance isn't enough, however. Your coverage should keep pace with changes in your life and finances.

Consider reviewing your policies regularly to make sure your coverage limits remain appropriate and that changes to your policy haven't eliminated protections you thought you had. This can be especially important after major life events, such as purchasing a home, acquiring rental property, starting a business, or experiencing a significant increase in your assets.

How You Own Property Can Matter

The way property is titled can also affect how well it is protected.

For married couples, one option recognized under Missouri law is ownership as tenants by the entirety. Generally, property owned this way belongs to the married couple as a single marital unit rather than to either spouse individually. Under the right circumstances, that can provide protection from certain creditors of only one spouse. However, tenants by the entirety ownership has limitations. It does not protect against every type of claim, and the protection can change if both spouses are liable, the marriage ends, or one spouse dies.

That's why property titling should be considered as one part of a broader estate and asset protection strategy rather than relied upon as the only line of defense.

Asset Protection and Estate Planning Should Work Together

Asset protection isn't simply about shielding property from a potential lawsuit. Good planning considers the bigger picture.

For example, your plan may need to address:

• How your assets are owned

• How your business or investment properties are structured

• Whether you have adequate liability insurance

• How assets will be managed if you become incapacitated

• How your property will pass to your beneficiaries

• Whether an inheritance you leave to a loved one should receive additional protection

Depending on your circumstances, trusts (such as Irrevocable Trusts, including Domestic Asset Protection Trusts), business entities (such as limited liability companies or LLCs), beneficiary designations, property ownership strategies, and other estate planning tools may all play a role.

The right approach depends on your assets, your family, your potential risks, and what you ultimately want your estate plan to accomplish.

Asset Protection Planning is Proactive Planning

Perhaps the most important thing to understand about asset protection is that it works best before you need it.

Waiting until a lawsuit has been filed or a creditor is pursuing a claim can significantly limit the strategies available to you. Transfers made after a claim arises may also be challenged or reversed.

You don't need to be extraordinarily wealthy to have something worth protecting. If you've worked hard to build financial security for yourself and your family, it makes sense to understand your risks and consider whether your current estate plan provides the protection you need.

At Quinn Estate & Elder Law, we help individuals and families look at their estate plans as a whole — including how their assets are owned, protected, managed, and ultimately passed on to the people they care about.

If it has been a while since you've reviewed your estate plan, or you're wondering whether asset protection should be part of your planning, we're here to help.