Onshore Asset Protection

As an experienced estate planning lawyer in Folsom, I am often asked by clients what the meaning of “onshore asset protection” is. Onshore asset protection refers to the legal strategies and tools individuals and businesses use to safeguard their assets within their home country’s legal system. It involves protecting assets from potential threats like lawsuits, creditors, and other financial risks while remaining compliant with the laws and regulations of the jurisdiction in which the assets are held. 

Here are some key concepts and strategies related to onshore asset protection:

1. Domestic Asset Protection Trusts (DAPTs): Some U.S. states, such as Alaska, Delaware, Nevada, and South Dakota, allow for the creation of Domestic Asset Protection Trusts. DAPTs are self-settled spendthrift trusts that allow grantors (the individuals creating the trust) to be beneficiaries while protecting the assets from creditors to a certain extent. Laws governing DAPTs can vary by state. California currently does not have any statutes authorizing DAPTs. 
2. Limited Liability Companies (LLCs): In the United States, forming a limited liability company (LLC) can help protect business assets by limiting the personal liability of the business owners. LLCs are a popular choice for asset protection due to their flexibility and relatively simple maintenance.
3. Family Limited Partnerships (FLPs) and Family Limited Liability Companies (LLCs): FLPs and family LLCs are used in family wealth planning. They allow families to pool assets while retaining control, protect assets from creditors, and facilitate the smooth transfer of assets to the next generation.
4. Retirement Accounts: Assets held in certain retirement accounts, such as 401(k)s and IRAs, may be protected from creditors and judgments under federal and state law.
5. Homestead Exemptions: Some states have homestead exemptions that protect a certain amount of the value of a primary residence from creditors. The protections and exemption amounts can vary widely by state. 
6. Business Structures: Choosing the right business structure, such as a corporation or an LLC, can help protect business assets from personal liabilities.
7. Insurance: Adequate insurance coverage, including liability insurance, can protect you and your assets from legal claims and lawsuits. Umbrella insurance can provide additional protection.
8. Estate Planning: Proper estate planning, such as creating a will, trust, or durable power of attorney, can help protect assets and ensure they are distributed according to your wishes in case of incapacity or death. It is important to note that estate planning generally does not provide creditor protection, rather it is meant to ensure that assets go to the intended beneficiaries upon death. 
9. Compliance and Transparency: Ensure that all asset protection strategies are compliant with the laws and regulations of your jurisdiction. Maintaining accurate financial records and transparent transactions is essential.

Conclusion

It’s important to note that onshore asset protection strategies should be implemented well in advance of any potential legal claims or financial threats. Attempts to protect assets after legal issues have arisen may be subject to fraudulent transfer laws. Additionally, asset protection planning should be part of a broader financial and estate planning strategy, and it’s crucial to consult with a qualified estate planning attorney in Folsom to create a plan that suits your individual needs. If you have any questions about onshore asset protection, contact Thapar Law at 916-579-0605 or send us a message.