Asset Protection For The Middle Class?

Gary Vawter called me the other day with a question I get quite a bit:  “What do you most often recommend to your planning clients who come in asking out asset protection?”

What I first tell them is not to do it in a vacuum.  To be useful, asset protection planning should only be done in context with the rest of your estate planning.  Next, I tell them their first line of defense is liability insurance.  Ohio has a $5 million ceiling on umbrella policies and, if you can afford it, there’s no reason not to have such a policy.  But really, most people don’t need or want complicated off-shore trusts or entities and, after they discover the amount of control that is usually lost in order to maximize the protection, most people give up – which is usually the right decision.

However, this afternoon I found this post at Acrimony.com.  While not a major departure from I usually tell my clients, this list on common asset protection techniques is more complete and has some good suggestions for asset protection planning for the ‘rest of us.’

  • Do Something TODAY. Every day that passes makes transfer, tools and actions you take to protect yourself stronger and harder to argue with. Trying to protect yourself after you have a liability event is rarely effective and usually illegal;
  • Liability Insurance is your first line of defense, buy every dollar you can afford,  including umbrella policies, assume it won’t work and have a back up plan;
  • Use corporate entities like LLCs as liability firewalls. Always divide and segregate your personal & business assets (and liabilities) as much as possible. “Sole Proprietor” is almost always the worst choice;
  • Don’t assume that a corporate entity on its own is complete protection. Remember that single member or “closely held” entities are subject to “piercing of the corporate veil”. If you own it, run it, control it, it can be argued that it is still YOU;
  • Get professional legal & accounting help to organize your assets and make sure you maintain the legal formalities of these entities like tax returns, meeting minutes and separate bank accounts or they won’t help at all;
  • Get your vehicles out of the name of your business. Many people do this for the deduction. If you or your spouse injures someone with your car you have created a “bridge” to your business and all it owns. Take a vehicle allowance instead;
  • Click here for the rest of the list.

    Thanks to Mr. Ike Devji for a great post.  Thanks also to Gregg Herman-Giddens of the North Caroline Estate Planning Blog for first posting to this.

    1 Response to “Asset Protection For The Middle Class?”


    • Thanks for inclduing me in your overview, I’m glad you found some of the points helpful. A few of these points were taken from a much larger article I wrote to educate clients and advisors for ADVISOR TODAY magazine,called “Asset Protection 101”, which continues to be used to educate clients, financial advisors, lawyers and CPA’s.

      Yours, Ike

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