Three Types of Asset Protection Strategies

Many people are becoming more interested in establishing strategies to protect their assets. The increase of litigious action against individuals has been increasing over the last few years. Because of this increase litigation, it is important to establish a strategy to protect your assets from overzealous creditors or individuals wishing to sue. It is important to begin creating an asset protection strategy now since only a slim percentage of Americans bother with any asset protection considerations at all. Asset protection strategies range from simple devices such as transferring assets to a retirement account, to more complex arrangements such as offshore trusts .

Asset protection planning can be effected in essentially three ways. The first asset protection strategy is divestiture, by which an individual transfers his property to another person, either by outright transfer or by having liens or mortgages placed upon the asset. This method relies on the simple truth that a creditor cannot have what a debtor does not own. The second asset protection strategy is through exemption  planning, where an individual transfers assets to a statutorily protected class of property, such as residential homestead, life insurance, or an IRA. These classes of protected property vary widely by state. The third strategy is through the use of liability shielding entities such as corporations and LLCs. Hiding one's assets is not part of responsible or effective asset protection planning. First, it may be against the law, and second, it doesn't work well.

No matter what type of asset protection strategy you choose to implement, it is important that you conduct a significant amount of research to fully understand what you are getting into. It may also be beneficial to consult with an asset protection strategy to fine tune your strategy and make sure it is legal.