III. ASSET PROTECTION & PRIVACY REVIEW
Insurance: Personal insurance is the first line of defense against creditors. Consider maxing out auto insurance limits, making sure you have sufficient homeowner’s insurance, and purchasing an umbrella policy.
Exemptions: Address certain assets that are protected from creditor attacks and bankruptcies. These exemptions can vary from state to state. Examples include homestead exemptions, life insurance cash values, annuities, and retirement plans.
Liability protected entities for investment assets: Think about placing most, if not all, assets into a liability protected entity. Rental properties, vacation homes, securities, financial and brokerage accounts, and other properties should be considered. Typically, the entity of choice for this type of personal creditor protection will be an LLC.
Domestic and offshore modular planning with Asset Protection Trusts: Add another layer of asset protection. If you have a revocable living trust, for example, you should know that such trusts do not provide asset protection from creditors.
DAPTs: DAPTs vary from state to state, but they offer significant protection from creditors. Real property or investments may be held within a liability-protected LLC, and then 95% ownership is transferred to the trust. This modular ownership of assets creates significant barriers to potential creditors, who must obtain a judgment against the business owner personally; sue the trustee of the DAPT and attack the legal viability of the structure; obtain a judgement against the LLCs; and receive a charging order remedy which could lead to further legal futility, income tax bills on income they never receive, delays, etc.