As you accumulate more wealth and assets, you’ll quickly discover that you become a bigger target for creditors, lawsuits, and others who want to take that wealth from you. Sooner or later, you’ll also find that it’s in your best interest to know how to “hide” assets legally from any possible opponents, whether those opponents are lawsuit plaintiffs, your ex-spouse, or someone else.
But hiding assets from judgments, creditors, and predatory lawsuits can be trickier than you think, particularly if you don’t have any experience in this arena. Let’s dive deeper.
Why Do You Need to “Hide” Assets from Legal Opponents?
We'll be frank. You need to hide assets as a high-net-worth individual because:
- You’ll find many people are overly eager to take your money and assets, especially as you get wealthier
- The legal system is not on your side
For example, you could be a doctor and have a patient sue you for injuries and damages if a surgery doesn’t go as you expect.
Or you could be an entrepreneur/business owner and have a customer sue you for a product malfunction that causes an injury. Or you could get divorced and have your ex-spouse try to go after half of your estate.
All of these are situations where it might be wise to hide assets like liquid capital, stocks and bonds, real estate, and other valuable property.
If you don’t take steps now, a single unfavorable judgment or creditor claim could significantly depreciate your estate and rob you of the money you’ve worked so hard to accumulate.
Hiding vs. “Hiding” Assets
There’s a difference between hiding your assets and “hiding” them in a way that stays strictly legal.
In a nutshell, "hiding" your assets involves simply putting your assets in places that creditors, lawsuit plaintiffs, and other opponents may not think to look.
If you are to truly hide various assets, you could theoretically break the law (since doing so would mean that you eliminated records of those assets, didn't pay taxes on those assets, etc.). It's never a good idea to play dangerous games with the law in this way – sooner or later, you’ll be found out and you’ll lose those assets, anyway.
Instead, “hiding” assets wisely involves doing things like:
- Putting the assets in offshore accounts or trusts where your creditors may not know to look
- Putting assets in places where they are unreviewable by creditors or lawsuit plaintiffs so they don’t know how much money “you” have
- Transferring ownership of assets to trusted third parties – this is the primary protection offered by an offshore asset protection trust, for example
Dominion recommends "hiding" assets through these strategies and more. In doing so, your actions will stay 100% legal, and you'll retain access to and benefits from your assets in the long term. But you’ll manage to effectively protect them from predatory judgments or aggressive creditors at the same time.
The Best Means to Hide Assets from Creditors, Lawsuits, and Other Foes
Indeed, there are plenty of ways in which you can hide assets from creditors, lawsuits, and anyone else who wants to target your estate for whatever reason. Some of these methods are better than others, so let’s review them one by one.
Offshore Asset Protection Trusts
Offshore asset protection trusts are, bar none, the superior tools with which to protect your overall estate and valuable assets. Offshore asset protection trusts work similarly to other trusts in that they have:
- A grantor, who fills the trust with valuable assets and money and who names the other key actors
- A trustee, who manages the trust and handles any distributions
- One or more beneficiaries, who receive distributions and benefits from the trust
An asset protection trust can protect your estate and assets by taking ownership of the assets placed within. Say you have $20 million you want to protect. If that money is in an asset protection trust, you legally no longer own it.
Then, if a creditor or judge demands that you pay with that $20 million, you can legally tell them that you can't do it. Offshore asset protection trusts are irrevocable, too – that means they can't be changed or modified after the fact.
Since such trusts are offshore, and are thus based in a jurisdiction other than the US, the banks and trustees managing your trust are not beholden to US court demands.
In contrast, domestic asset protection trusts do oftentimes have to listen to court orders, and there’s a mountain of US case precedent that collectively weakens domestic trusts compared to their offshore alternatives.
In addition to all that, by nature of being an offshore trust, any assets stored within aren't listed under your personally owned assets.
Any legal or financial opponents you encounter in the future might not even know you have the assets in an offshore trust, so they may not target them or try to get them in the first place.
Bottom line: offshore asset protection trusts are the single best means to hide valuable assets from creditors and lawsuits.
Offshore Bank Accounts
Offshore bank accounts work similarly to asset protection trusts in foreign jurisdictions. The right offshore bank account can hold liquid capital and certain other assets in a country other than the US. Those assets will then be subject to different taxation and financial laws, and they may not be as vulnerable to creditor claims or lawsuit-related seizure.
Once more, since offshore bank accounts are literally in a different jurisdiction, creditors and lawsuit plaintiffs will have a harder time finding the money in those accounts and deciding to go after it. The best defense, in some respects, is one that prevents a legal battle from happening at all.
Are LLCs Effective for Asset Defense?
Limited liability companies are oftentimes used by business owners for both their structural and taxation-related benefits and for asset protection. Unfortunately, LLCs are not truly effective for defending your assets against a wide range of legal threats.
On paper, an LLC works by separating your personal and business-related assets. Then, if your business is ever sued by a disgruntled customer or some other plaintiff, even if the lawsuit is successful, only business assets will be at risk.
But in the real world, it’s usually quite easy for an opposing lawyer to prove that, at some point, you pierced the corporate veil and mingled your business and personal assets.
Have you ever used the company car to grab some groceries for your house? Or have you ever used your business credit or debit card to make a quick purchase with the intent of paying your business back later on?
Any of these instances and many more could jeopardize the so-called protection an LLC offers your overall estate. So while you could rely on an LLC for your primary business structure, you should never use it as one of your key asset protection tools.
It’s also not effective for hiding assets from creditors – any assets in your LLC aren’t hidden if the LLC is based in America.
What About Insurance Policies?
Insurance policies are similarly less than stellar choices for hiding assets from creditors and lawsuits. That’s partially because insurance policies are not meant to hide assets at all; think of them as ablative shields that you can use to pay down debts or lawsuit damages if needed.
Say you're a successful surgeon, but one of your patients decides to sue you for one reason or another. You should have malpractice insurance. In that case, you'll pay any court-related damages and fees out of your insurance policy (or, rather, your insurance company will foot the bills for you). In this way, your personal assets are protected.
But this has nothing to do with hiding assets, and insurance policies aren’t comprehensive asset defense tools in any event. For example, insurance policies have limits to their monetary coverage, so you might be sued for more than your insurance policy covers.
It's often a better idea to use insurance policies with other asset protection tools, like offshore bank accounts or trusts, to both maximize your overall asset security and to ensure that you are protected against frivolous lawsuits or adverse legal judgments in the future.
Contact Dominion Today
When you work with Dominion, we won't just hide your assets and keep them safe from creditors – we'll help you form and enact a comprehensive, long-term asset protection strategy that benefits you and any future beneficiaries in the decades to come.
It all starts with a durable offshore asset protection trust created in a jurisdiction that best suits your needs and best insulates you from US court rulings and judgments. However, we can also help you create a trust or offshore bank accounts that enable regular income generation, estate management, or whatever else your goals happen to be.
We offer premium services to high-net-worth individuals just like yourself, and we've collectively managed hundreds of millions of dollars for our clients over the years. Contact one of our representatives today to learn more about how we can craft an effective asset protection strategy for your needs.