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Five Key Asset Protection Mistakes: Insight From a Renowned Wealth Advisor Thumbnail

Five Key Asset Protection Mistakes: Insight From a Renowned Wealth Advisor

Five Key Asset Protection Mistakes: Insight From a Renowned Wealth Advisor

Welcome back to our blog! As a recognized wealth advisor, I'm here to guide you on an essential aspect of your financial life that often needs to be discussed more: asset protection. Today, we'll delve into the five most common asset protection planning mistakes among affluent individuals and how to avoid them.

Understanding Asset Protection

Having substantial assets often makes you a target for lawsuits, regardless of whether you are a successful business owner or a high-earning professional. Remember, anybody can be sued, and the stress, aggravation, and financial losses that can result are significant.

That's where asset protection planning steps in. The goal is to create barriers around your wealth using legally accepted strategies, concepts, and specific financial products to deter litigants and creditors. This encourages amicable settlements and can help avoid litigation entirely.

It's important to note that asset protection planning isn't about hiding assets, dodging taxes, or defrauding creditors. It's a legitimate facet of wealth planning. That being said, asset protection can be complex and even difficult if not handled properly. So, let's go over the five major mistakes we often see in asset protection efforts.

Mistake #1: Late Asset Protection Planning

Asset protection strategies are ineffective if implemented too late. Transferring assets after you are aware of a potential claim against you can be considered fraudulent conveyance and can be reversed by courts. The key to avoiding this is to start asset protection planning as early as possible - before you anticipate needing the protection.

Mistake #2: Insufficient or Improper Liability Insurance

A crucial asset protection planning component is adequate and suitable liability insurance. It's common to find that accomplished business owners need more robust general liability coverage. Liability insurance, often overlooked, is relatively inexpensive and acts as the first line of defense in an asset protection plan. Regular stress testing of your liability coverage can help you identify and remedy any gaps.

Mistake #3: Disconnected Wealth Planning Efforts

Wealth planning involves numerous specialized areas, including estate planning, income tax planning, and asset protection planning. These are typically seen as separate entities, but there are significant advantages to adopting a holistic approach where all components of your financial life work in unison.

This unified approach enables you to comprehend the trade-offs you are making and any risks you might otherwise overlook. For instance, gifting to heirs might be great for estate planning but may be seen as a fraudulent conveyance in asset protection.

Mistake #4: Lack of Understanding of Your Plan

If you need help understanding the goals of your asset protection planning or why specific actions were taken, there's a high probability that your plan will fail to provide the protection you seek. While asset protection planning can get complex due to various factors in a person's financial and personal situation, it's crucial that you can explain, in broad terms, the logic behind the actions taken.

Mistake #5: Choosing the Wrong Professional

Finally, the selection of your financial professional is vital. Many individuals profess expertise in asset protection planning, but not all possess the necessary skill set. Some might know just enough to land you and themselves in trouble, while others might prey on your fears and deliver ineffective asset protection solutions. Therefore, working with a genuine expert in the field is imperative.


We recommend working with a wealth manager with an asset protection specialist on their team to ensure optimal benefits from your asset protection planning. Remember, asset protection is just part of a broader wealth planning initiative. With the right strategies and guidance, you can protect your hard-earned wealth from potential threats and ensure your financial security. Stay tuned for more.

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