For individuals with significant wealth, becoming a target for unwarranted litigation is a real concern. This makes implementing robust asset protection strategies essential. These strategies combine legally sound principles with specific financial instruments to safeguard your wealth from unjustified claims.

​However, navigating asset protection requires careful consideration and expertise. Here are five critical errors we frequently observe among wealthy individuals attempting to protect their assets—and guidance on how to prevent them.

Timing is everything in asset protection planning. Implementing protective measures after becoming aware of potential legal action can be not only ineffective but legally problematic. Moving assets into protective structures like trusts after a claim is foreseeable may be classified as a "fraudulent conveyance" and reversed by courts.

​Fraudulent conveyances come in two forms:

The solution is straightforward: implement asset protection strategies well before they're needed. Proactive planning is the only effective approach.

A cornerstone of effective asset protection is maintaining appropriate liability insurance coverage. Many wealthy individuals would benefit from expanded umbrella liability policies but overlook this option. Similarly, successful business owners often maintain insufficient general liability coverage or could benefit from enhanced directors and officers (D&O) liability protection.

​Fortunately, liability insurance is relatively cost-effective. After lawsuit prevention—which isn't always within your control—insurance serves as your first line of defense. Regular evaluation of your coverage through stress testing is advisable.

While standalone asset protection planning is possible, integrating it with your broader wealth management strategy—including estate and tax planning—typically yields superior results. This comprehensive approach helps identify potential trade-offs and hidden risks.

Consider this: gifting assets to heirs might seem like an effective estate planning strategy, but it could be deemed fraudulent conveyance from an asset protection standpoint.

​Taking a holistic approach to wealth planning, rather than addressing each aspect separately, typically produces more effective and economical solutions that better serve you and your family's interests.

If you cannot explain the basic rationale and intended outcomes of your asset protection plan, it may not provide the security you seek. During legal proceedings, such as depositions, courts may view asset transfers suspiciously if you cannot articulate your reasoning behind them.

While you don't need to master every technical detail, you should be able to explain the fundamental logic behind your protection strategy.
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Some financial advisors possess just enough knowledge about asset protection to create problems rather than solutions. To achieve optimal protection, partner with a recognized authority in the field—someone other financial professionals acknowledge as an asset protection expert.

To assess your wealth's vulnerability to unfounded lawsuits, consider conducting a stress test of your current plan:

The goal is to develop confidence in your protection strategy—one that aligns with your needs and preferences while balancing asset protection with other wealth management objectives.