Don't Lose Wealth to Bad Actors and Opportunistic Claims

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Don’t Lose Wealth to Bad Actors and Opportunistic Claims

Written by: Frank Fantozzi

It may seem hard to believe, but a single lawsuit resulting from, for example, a minor car accident or routine business transaction, could create significant financial consequences if you don’t have a strong asset protection plan in place. Asset protection means anticipating potential threats and taking steps to preserve what’s yours from unreasonable legal or creditor claims.

You don’t need to be super wealthy to want to prioritize asset protection. Just consider whether your personal and professional activities and your assets might make you or family members targets for bad actors.

Low and high risk

The first step in creating an asset protection plan is to assess the risk that creditors, former spouses or opportunists will go after your wealth. If your risk is relatively low but you want added peace of mind, you might want to change the way assets are titled or gift them to your loved ones while you’re alive.

Higher risks usually call for more sophisticated approaches. For example, if you own a business, you might want to structure it as a limited liability company or corporation to shield your personal assets from business-related claims. Other potentially risky activities include working in a profession with a high malpractice risk, owning a backyard pool, or keeping an aggressive dog. Even having teenage children — especially if they drive — will raise your risk.

Insurance typically is the first line of defense in such cases. You may require personal or homeowner’s liability insurance, an umbrella policy (to cover liability costs above those offered by standard homeowners and auto insurance), errors and omissions insurance, or professional liability/malpractice coverage. Discuss potential needs with your financial advisor and insurance agent.

Other possible strategies

There are other strategies to consider. For instance, if you’re willing to part with ownership, a simple yet highly effective way to protect assets is to give them to your spouse, children or other family members. You can do this either outright or through an irrevocable trust. Litigants or creditors can’t go after assets you don’t own (provided any gift you make doesn’t run afoul of any laws). Just choose your recipients carefully to help make sure you don’t expose the assets to their creditors’ claims.

Another simple but effective technique is to retitle property. For example, the law in many states allows married couples to hold a residence or certain other property as “tenants by the entirety,” which protects the property, so long as it’s owned, against either spouse’s individual creditors. This strategy, however, doesn't provide any protection against a couple’s joint creditors.

Also, you may be surprised to learn that maxing out your contributions to 401(k) plans and other qualified retirement accounts doesn’t just set aside wealth for retirement. It protects those assets from most creditors’ claims as well. Traditional and Roth IRAs also offer limited shelter.

In the event of bankruptcy, they’re protected against creditors’ claims up to just over $1.7 million currently. Outside bankruptcy, the level of creditor protection depends on state law, which varies by jurisdiction and may change over time. For example, Florida and Texas provide practically unlimited protection for all IRA assets. Other states, including California, Mississippi, Nebraska and Vermont, protect assets held in traditional but not in Roth IRAs.

Word of warning

It’s important to note that asset protection isn’t about evading legitimate debts, hiding assets (for instance, in the case of divorce) or defrauding creditors. Another thing to keep in mind: You need to put your asset protection plan in place before any legal or creditor claims are asserted (or even threatened).

Debtors generally aren’t allowed to transfer assets to evade their creditors, and some asset protection strategies could violate “fraudulent conveyance” laws if attempted at the wrong time. If you’re concerned about this possibility, talk to an attorney. To establish a plan that addresses realistic threats to your wealth, work with your financial advisor and qualified legal counsel.© 2026

Important Disclosures

Investment advisory services offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

The views expressed are current as of the date of publication and are subject to change without notice. This material is provided for informational and educational purposes only and is not intended as investment, tax, legal, insurance, creditor protection, asset protection, or financial planning advice. Individuals should consult with qualified legal, tax, insurance, financial, and other professionals regarding their specific circumstances.

Asset protection, creditor protection, and property ownership laws vary by jurisdiction and may change over time. The effectiveness of any strategy depends on individual circumstances and applicable law.

All investing involves risk, including the possible loss of principal.

For more information about our services and regulatory disclosures, please see our Form ADV at www.returnonlifewealth.com/additional-disclosures .