Perhaps there is no more unfortunate financial tragedy for any individual than to have worked so hard for a lifetime, only to see financial or economic crisis result in business reversals, bankruptcies, and loan defaults. Unforeseen lawsuits can threaten everything they’ve put up their whole lives. Instead of waiting for potential creditors to go after your estate and start raiding your assets, you might want to plan ahead and map a protection strategy.

There are quite a number of U.S. laws meant to protect an individual’s assets from potential bankruptcies, actions for collection of sums of money owed, and lawsuits. If you’re looking for someone to ask about how to protect your assets, you can check out https://weinerlegacylaw.com/ and other similar sites. Here are a few suggested ways on how you can set up sound protection for your assets.

• Qualified Retirement Plans

One of the most ironclad ways to protect a good portion of your savings and assets is by putting them in qualified retirement plans. Savings and funds placed in an employer-sponsored plan enjoy unlimited protection. Regardless of whether or not the plan is covered by the Employee Retirment Income Security Act (ERISA), these funds are beyond the reach of bankruptcy proceedings. 

Among those included in this category of asset protection plans are government plans, defined-contribution plans, defined-benefit plans, Savings Incentive Match Plan for Employees (SIMPLE) IRA, Simplified Employee Pension (SEP) IRA, and church plans. Do note though that you’re limited to USD$1 million limit on regular IRA contributions to your SEP IRA plan. 

• Annuities And Life Insurance

A second way to protect your assets and savings would be to invest portions of your wealth in annuities and life insurance. Keep in mind that state law governs life insurance and annuities, and the extent of protection accorded to them in each state. In some states, the level of protection covers the entire cash surrender values of life insurance policies and annuity proceeds. Protection means they’re beyond the reach of any garnishment, attachment, or other legal processes, which may be resorted to by creditors.

In other states, though, the level of protection covers only the extent of the beneficiary’s interest in the cash surrender values and annuity proceeds. This means the protection only goes so far as the extent of the amounts reasonably needed by the beneficiaries for their material support. There are even some states which don’t provide any protection at all. 

• Homesteads

For your homes and residential properties, you can protect them through the provisions of homestead protection laws. Homestead protection means if something bad happens to you, creditors can’t go after your residential properties which are declared part of your homestead. 

Again, the rules vary from one state to another. There are states which provide unlimited protection to your homestead. This means if something happens to you, no one among your creditors can go after your homestead, nor any portion of it. Other states, however, provide only limited protection. There are also a few states where there is no protection for homesteads at all.

• Irrevocable Trusts

Another way to protect all or a portion of your wealth and assets is by setting up an irrevocable trust and putting them in there. The trust has to be irrevocable. When you transfer your wealth and assets into the irrevocable trust, the trust becomes the owner of the transferred assets. You are deemed to have lost control over how the transferred assets will be administered or distributed. 

The law here revokes from you any ownership of the transferred assets. And since you’re no longer the legal owner, those assets are beyond the reach of any creditors who may think of going after them. They can’t go after those assets to satisfy any judgment they may obtain in their favor.

• Asset Protection Trust

An Asset Protection Trust (APT) is a way for an individual to transfer a portion of their assets into a trust run by a trustee appointed by them. In the past, this method was often used by wealthy individuals to hide their wealth in offshore trusts located in territories outside of mainland U.S. Over the years, they’ve become quite expensive to maintain, though.

There are a number of states which now allow the creation of APTs even if you’re not a resident of that particular state. Among these states are Alaska, Nevada, South Dakota, Delaware, and Rhode Island. You don’t even have to be a resident of the state to be allowed to open the asset protection trust.

Shielding Your Assets

Individuals work so hard for the most part of their lives to accumulate wealth and assets, which they can use for their retirement or pass on to their heirs or beneficiaries. There are times though when they forget to set up a way to protect their assets from potential creditors and other people who might take an interest in raiding their wealth. 

To be able to effectively protect your assets, you should plan ahead and set up the mechanisms long before you become too weak to shield your assets against interested parties.