Asset Protection for High Networth Individuals: What to Know 

Asset protection is a critical responsibility for preserving your wealth. It entails strategically protecting what you've earned against potential hazards and unforeseen circumstances. Whether you are an employee or a business owner, asset protection is critical for long-term financial stability. 

Asset protection measures can provide a legal and financial barrier between professional and personal assets. This can reduce liability if a legal or creditor claim is filed against your company, rental property, or professional activity. Asset protection measures can also be used to shield assets following a divorce and significantly improve your financial privacy by hiding public records and making you less exposed to litigation in the first place.

However, wealth management and protection can become even more complicated once you reach a net worth of more than $10 million (and become a High-Net-Worth Individual). Not only are tax rates increasing dramatically, but events such as divorce or other types of litigation may also pose a danger to your wealth preservation. And after years, if not decades, of hard work, you naturally deserve to reap the benefits of your efforts.

Fortunately, with the correct asset protection techniques in place, you may save and even comfortably expand your net worth for the rest of your life, as well as for your children and grandkids.

What Does Asset Protection Mean for High Networth Individuals? 

There are assets and assets. More particular, high-net-worth individuals frequently own assets beyond what the typical individual might imagine.  We're not talking about a few automobiles in the garage; we're talking about many cars, houses, businesses or subsidiary firms, stocks and bonds, investment interests, and plenty of liquid wealth. Said there is a lot to safeguard as a high-net-worth individual. And if that's the case, you should grasp what quality asset protection entails for someone in your financial condition.

Asset Protection Strategies For High-Networth Individuals 

Focus on Quality 

Good asset protection for someone in your financial situation should prioritize quality over all other considerations. At your level of affluence, you don't buy items based on their affordability, correct? 

The same idea applies to asset protection. When it comes to protecting your estate not only for the next few years but for decades, you want the finest of the best, a quality asset protection plan that considers all potential threat vectors and has a contingency plan in place for each of them. 

Your asset protection plan should provide excellent service results, flexibility, and strategic value. Consider it an investment that pays for itself and is significantly more valuable than the typical option.

Asset Protection Trusts

Asset protection trusts (APTs) and family asset protection trusts (FAPTs) are novel and specialized premium trusts that can also be used to protect your assets in the case of aggressive legal actions (such as divorces or responsibility suits). Because asset protection trusts are irreversible, they are especially effective at asset security. Simply put, the trust's settlor cannot change or alter the trust soon after it is established.

High-net-worth individuals can also form offshore asset protection trusts. Allocating assets to offshore asset protection trusts might give an extra layer of legal protection in case of domestic legal issues. Similarly to offshore bank accounts, you should ensure that your offshore trusts comply with all legal and financial requirements, such as tax, that apply to those regions or sovereign states. 

Get at least $10 million in liability insurance.

The most straightforward approach to protect your assets is to obtain sufficient liability insurance coverage, also known as an "umbrella policy." However, many clients we work with need to be more insured, with only a few million dollars of liability insurance. 

Most rich households should have a policy worth at least $10 million. In most circumstances, having $20 million or more in coverage is recommended. In the big scheme, purchasing liability insurance is a relatively low-cost approach to avoid losing significant assets in lawsuits.

Limited Liability Company (LLC)

Setting up a limited liability company  can assist in further safeguarding your assets from potential business obligations, just as business liability insurance can protect your company in the case of legal action against it. However, this is simply the tip of the iceberg regarding LLCs' ability to protect your assets. Like trusts, you can form LLCs and FLPs (family limited partnerships) to ensure that assets go to those legal entities rather than you. 

Jointly own your assets.

Going for jointly owned assets is frequently unappealing to creditors because they hold the asset alongside another individual. To separate from the other owner, a creditor must file a partition action, which is costly and time-consuming. That is why splitting ownership of specific assets with your spouse or other family members may be prudent.  

More Options/Flexibility

Versatility is essential for efficient asset protection. After all, laws change frequently, and you never know when a new legal threat will surface. 

As a result, your high net worth asset protection strategy must include contingency plans and anticipate potential threats to your estate in the future.

Bottom Line 

Wealth management is more than just protecting assets. Maintaining and protecting assets is essential in any financial plan, particularly for someone with an extensive portfolio. You cannot take it with you but do not want to lose it.