The 4 Most Overlooked Asset Protection Strategies

The 4 Most Overlooked Asset Protection Strategies

The truth is that these strategies are rarely considered when it comes to asset protection simply because they are NOT considered by experts as asset protection strategies per se. The IRS and tax strategies can provide an example to explain. The IRS and the tax court look at a tax shelter or transaction with one simple test in mind. They will ask if the taxpayer did the deal shelter simply to save taxes or if there was another valid economic purpose.

In comparing that analysis to the asset protection, particularly from creditors, the strategy will be subject to more risk of penetration or voiding if it was done simply to protect assets. Assets will be better protected if the strategy had another valid economic purpose. The strategies that follow are excellent asset protection strategies simply because their primary purpose is not for asset protectioni.

#1 – Qualified Retirement Plans

The IRS considers a retirement plan as “Qualified” if it complies with certain rules as set out by the Department of Labor and the Internal Revenue Service. These qualified plans include money purchase plans, profit sharing plans, pension plans, 401(k)s, or 403(b)s. When these retirement plans are properly structured and implemented, they provide real economic benefits to both the plan participants and the businesses and owners that provide them.

The qualified nature of the plans also protects them in bankruptcy actions. There are some limits to this protection, but in most cases the assets in the plan are protected from creditors in a bankruptcy. The overwhelming majority of plan originators and participants are not involved in the plans for purely asset protection strategies. Instead, they are involved for the other tax, economic, and savings benefits. Thus, they offer excellent asset protection, though they are not designed with that as a primary purpose.

#2 – Fringe Benefit or Non-qualified Plans

Retirement and asset accumulation plans that are not considered qualified by the IRS can still be quite attractive for tax savings while accumulating assets for retirement. They can be used in addition to qualified plans to create multi-level retirement or benefit plans for employees. Properly structured, these non-qualified plans can also be excellent asset protection strategies.

#3 – Captive Insurance Companies

Many of the largest corporations in the country use CICs, Captive Insurance Companies, for multiple economically advantageous reasons. Small businesses can also create their own licensed insurance companies. These company-owned insurance companies are used to insure against business risks of all types, including:

  • Malpractice
  • Economic
  • Litigation
  • Product liability

The business can couple captive insurance coverage with reinsurance for larger risk exposures. In addition, proper structuring of the CIC can provide extensive asset protection benefits.

#4 – CVLI, Cash Value Life Insurance

The CVLI insurance policy is overwhelmingly popular for tax benefits, tax-free growth, tax-free access to funds, and a tax-free death benefit. They are also used for estate planning and family protection. The often-overlooked benefit of CVLI policies is that in many states they enjoy extensive asset protection benefits, with protection from creditors.

The next time you are consulting with your estate planning, tax, or asset protection professionals, ask them about these four dual purpose asset protection tools.

i The Best Asset Protection is Not Asset Protection… Is Yours? –


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