Protecting Your Assets From The Government | Detroit Tax & Family Law Firm (2024)

FAQs

What is the strongest asset protection? ›

Trusts are one of the strongest asset protection tools you can use. They can protect your assets from creditors, legal claims, and anything else threatening your estate or business.

Asset protection is especially important if you're in a high-risk occupation or have high-value assets. Most asset protection strategies work by moving property into a separate entity, and many double as estate planning tools.

Another simple but powerful strategy is to place your assets in someone else's name, such as your spouse's. If you're sued, those spouse-controlled assets are often untouchable. WARNING: Be sure you have a great deal of trust in your spouse and your marriage before transferring ownership of assets to him or her.

Irrevocable Trusts

Using an irrevocable trust allows you to minimize estate tax, protect assets from creditors and provide for family members who are under 18 years old, financially dependent, or who may have special needs.

Asset protection trusts offer a way to transfer a portion of your assets into a trust run by an independent trustee. The trust's assets will be out of the reach of most creditors, and you can receive occasional distributions. These trusts may even allow you to shield the assets for your children.

Some common methods for asset protection include asset protection trusts, accounts-receivable financing, and family limited partnerships (FLP). If a debtor has few assets, bankruptcy may be considered the more favorable route compared to establishing a plan for asset protection.

Millionaires diversify their assets by distributing them among various classes such as stocks, bonds, real estate, etc. In my experience, I've found that many also diversify assets across different jurisdictions such as the U.S., Switzerland and the Cayman Islands.

What are the disadvantages of asset protection trust? ›

The major disadvantages that are associated with trusts are their perceived irrevocability, the loss of control over assets that are put into trust and their costs.

Asset Protection Trusts (APT) are considered to be the strongest asset protection tools available. These are special types of irrevocable trusts where you can be both the settlor and the beneficiary at the same time.

While offshore asset protection trusts are the overall best tools for asset defense as a high-net-worth individual, you should also look into limited liability companies if you haven't already. An LLC limits your personal liability related to lawsuits or creditor claims against your company.

For many business owners a Limited Liability Company (LLC) may be the best choice because it provides more asset protection than a sole proprietorship or a partnership but without the all legal formalities of a corporation.

Irrevocable trusts

The assets move out of your estate, and the trust pays its own income tax and files a separate return. This can give you greater protection from creditors and estate taxes.