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Frequently Asked Questions

Answers to Great Questions about Asset Protection

This question and answer is based on an interview with Hillel L. Presser by the Financial Forum

What is Asset Protection? And why is Asset Protection so important?

We live in a lawsuit crazy, financially risky world; one where people unexpectedly lose their assets. More families, individuals and businesses get sued or go bankrupt each year. It can happen to anyone! That's why so many people today are anxious to protect their wealth; they seek financial security and want peace of mind!

Should only the wealthy protect their assets?

That's absolutely not true! It's true that America's wealthiest families were traditionally deep pocket defendants who were most concerned about shielding their wealth. The social elites of past eras sheltered their massive wealth with trusts, family corporations and other protective entities, which privatized or lawsuit-proofed their properties; however, they seldom referred to their financial strategy as 'asset protection'. But the super-rich are no longer the only lawsuit target — Americans with any assets now need protection!

Is the litigation issue in America as out of control as experts say?

In today's world, not only the rich and famous are getting sued, so do thousands of ordinary folks who had only hoped to build some financial security for themselves and their families. Unfortunately, it can take only one lawsuit to cause a financial disaster. To date, there are over 100 million lawsuits filed each year, which means you have a one in four chance that you will be sued in the next year. And this doesn't include all the other potential threats.

Is itlegal to shield assets against lawsuits and creditors?

It's not only legal, but essential! Yes, there can be that troublesome grey area that separates legal from illegal asset protection planning, but you can't cross that line. Many journals and articles openly discuss and recommend asset protection such as the American Bar Association, who has formed an asset protection subcommittee. We might explain the legitimacy of asset protection as the intelligent application of many statutory and common law tools to best shield one's wealth. We didn't create these tools, we only show how clients how to use them to their advantage.

How can I assist my professionals?

Become knowledgeable! To some extent, you must take your own counsel. Understand the fundamentals of asset protection as you master the basics of investing or tax planning. If you're somewhat knowledgeable, you can better measure a prospective asset protection lawyer's competence. Please visit to check out more publications on asset protection!

Protecting your Investments

Is it unsafe for spouses to own their investments (savings, CDs, stocks, bonds, mutual funds, etc.) in their individual names?

Obviously, it's the most dangerous way to title these important assets. Yet many people who own considerable investments do title their accounts in their individual names. Or the spouses may own their investments jointly. But either form of ownership leaves the assets unprotected. You never want to keep these assets in your own name. They should always be titled to a protective entity unless they are exempt or protected by state or federal law.

Protecting the Family Home

How vulnerable is the home to lawsuits?

Many Americans consider their home their most valuable and vulnerable asset. Certainly, it's the one asset for which they have the most concern when they are sued because they are most emotionally attached to their home. The home is also vulnerable to lawsuits because it's usually titled personally to their owners. Personal ownership may be necessary for conventional home financing and to claim the federal capital gains tax benefits, homestead protection, and real estate tax abatements available to seniors. Finally, the home is vulnerable because it can be readily attached simply by filing a judgment with the county recorder. This effectively transfers the home's equity to the creditor.

Protecting Non-Residential Real Estate

Would we use the same strategies to protect vacation homes, rentals or commercial properties as we would our home?

No. The strategies to protect your vacation home and investment real estate follow somewhat different strategies than what we would use to lawsuit-proof your home. We use different strategies for the home because we want to preserve the home's tax benefits. You also want to keep your homestead protection. However, homestead protection and the homeowner's tax benefits don't extend to other real property. We then have different protective options for non-residential real estate properties that can pose different threats and liabilities than your home. Investment properties, of course, can also impose more potential liabilities than will your residence, so you also want to personally protect yourself against the potential liabilities that arise from owning rental properties. Landlords face many potential liabilities including getting sued by tenants, tenant's guests, sublessees, neighborhood associations, contractors and even trespassers. A landlord can be held 'strictly liable' whether or not the landlord acted negligently.

Protecting your Retirement Accounts

Retirement accounts are a major asset. How can they be protected from creditors?

We must divide retirement plans into ERISA-qualified and non-qualified. ERISA qualified plans are retirement accounts under the Employee Retirement Income Security Act of 1974 (ERISA). Non-qualified plans include IRA's, Roth IRA's and SEP IRA's. ERISA pension or profit sharing plans are spendthrift trusts. Their beneficiary cannot gift, anticipate or encumber the plan's principal or income. This spendthrift provision immunizes the plan from creditor claims. Qualified retirement plans include profit sharing plans (defined contribution plan), pension plans (defined benefit plans) and 401K and 403B plans (plans where the employee makes voluntary contributions). But not every ERISA pension plan is lawsuit-proof. Technical deficiencies and non-compliance issues may also disqualify 401K and similar plans from ERISA protection. That's why it is important to have your asset protection lawyer or plan administrator review your pension plan, you can't assume it's protected.

Protecting your business

How important is defensive planning for small or mid-sized businesses or professional practices?

While lawsuit proofing is necessary for every individual, it is no less important for small businesses and professional practices. They are more vulnerable to lawsuits and creditor problems than are individuals and need their own brand of financial protection. Unfortunately, few business owners go through the advance planning necessary to blockade lawsuits and other inevitable financial threats that can sink their business. Business start-ups are the products of entrepreneurs and entrepreneurs are fueled by optimism. They journey into business happily envisioning only the upside, seldom the downside. Because they are success-oriented, they ignore the possibility of failure and overlook the most obvious precautions necessary to protect themselves and their business when trouble strikes. Experienced businesspeople are more realistic, and reduce their risk by defensively positioning their enterprise because they understand that their businesses will face inevitable wars with creditors and litigants. A well-fortified business always has the best chance to survive.

Protecting your Estate & Inheritance

Is it more advantageous to combine an estate plan with an asset protection plan?

The two objectives are closely connected. You can work a lifetime to accumulate your wealth and lose it all to your creditors after you die. Or you can lose it your children's creditors or ex-spouses. Children do lose their parents' hard earned money. Without careful planning you can also lose a fortune in estate taxes. So you must also think about how you can best protect your assets after you pass on. We want our clients to look ahead. How can they shield their wealth from creditors, tax collectors, and wasteful heirs after they're gone? On the other hand, you may be a beneficiary of a large inheritance. You must then ask yourself similar questions. How should you safeguard your inheritance against your financial problems? What would happen to your inheritance if you divorce or go bankrupt? These matters take careful thought.

Protecting your other Assets

What other assets are important to protect with an asset plan that most individuals wouldn't even think about?

There are many other assets that range from bank accounts and wage income to life insurance, jewelry, vehicles, intellectual property and even money due from others that you can lose in a lawsuit. These "miscellaneous" assets are frequently overlooked and unprotected. The best way to prevent overlooking these assets is to create a detailed inventory of every asset that you own. You should then check your state exemption laws. Some of these assets may be partly or fully protected from lawsuits. You must then title miscellaneous assets that have no statutory exemption to one or more protective entities, encumber them with liens or adopt other protective strategies.


The best defense is a good offense.