Asset protection is a great way to legally shield your assets from lawsuits and creditors. Individuals with assets in the form of businesses, stocks, and other resources want to protect their wealth and privacy. It is advisable to seek the guidance of a knowledgeable financial advisor or wealth solutions firm, such as Ora Partners Limited, J.P. Morgan Chase, Morgan Stanley, and Fidelity Investments, to navigate the intricacies of this process.

Here’s how high-net-worth individuals can protect their assets from potential lawsuits, creditors, and even spouses.

Do you need to protect your assets from lawsuits?

If you lose a lawsuit—one filed by a creditor, for instance, attempting to collect your unpaid debt—you face the loss of assets such as your home or money in your bank accounts. Additionally, legal fees drain your wallet, damage your reputation, and take up a lot of your time and energy.

The key is to protect your assets in advance, and the longer you do it in advance, the safer your assets will be.

The strategies to safeguard an individual’s assets are as varied as the assets themselves. Below are two ways you can protect your assets from lawsuits and creditors.

Offshore Asset Protection Trusts

Offshore trusts are not very common, but they may be a great option for individuals with high net worth and high earners. For example, one tool that you can use to safeguard your assets is an offshore asset protection trust in the Cook Islands. The Cook Islands is a nation in free association with New Zealand. The island country is more politically stable than most offshore trust jurisdictions. 

Cook Islands trusts enable individuals to keep ownership of their assets. However, the management of the trust is held outside the U. S., so the party who creates the trust (settlor) is not at risk of losing all their assets due to U.S. court orders. It’s important to note that individuals cannot establish an offshore trust to avoid IRS tax debts; they still need to pay their taxes.

A New York Times article called the Cook Islands a “global pioneer in offshore asset-protection trusts.” Cook Islands trusts offer a great deal of security and privacy protection for U.S. citizens trying to protect their assets from lawsuits.

Limited Liability Companies 

A limited liability company (LLC) holds the assets of a business. This legal business entity can protect assets from being seized by creditors. In other words, an individual’s car, home, or checking and savings account would be safe from creditors. However, business assets in an LLC typically would not be safe.

Limited liability companies are allowed under state statutes. However, the regulations governing LLCs vary from state to state. LLC owners are generally called members. Many states don’t restrict ownership. It means anyone can be a member, including individuals, corporations, foreign entities, and even other LLCs.

Think of an LLC as a financial manhole cover. It can be put on top of assets, and if something unexpected occurs, such as a lawsuit, that liability is not going to bubble up and impact all the other assets.