6 Strategies For Protecting Your Assets From Lawsuits and Creditors on a Global Scale


Have you ever heard the saying, “It takes decades to build up a reputation but only minutes to ruin it”? If not, this saying just means that one miscalculated step can ruin decades of work. In our opinion, this saying applies to more than just your reputation – it also applies to your fortune.

It takes decades to build up a business or grow a portfolio of investments. But, it only takes one legal misstep to leave your fortune exposed to ex-spouses, government agencies, or other devious cretins looking to get their hands on what you’ve built. If you’re reading this article then you’re probably already an expert at building wealth. But what about protecting it?

In this article, you’ll learn 6 strategies that can help you protect your assets from lawsuits and creditors. If you don’t feel like reading this whole article, you can also schedule a consultation with international tax and wealth protection expert, Jimmy Sexton, LL.M. to start protecting your wealth today

Strategy 1: Own Nothing, But Influence Everything

Strategy #1 is actually a new take on an old expression. In the past, this expression was “Own nothing, but control everything.” However, courts and tax authorities around the world have wised up to this tactic. If you still have total control over your assets then courts and tax authorities will likely determine that the asset is still yours – even if you don’t technically own it. So, the new-and-improved strategy is “own nothing, but influence everything.” So, what does this mean?

Own nothing, but influence everything” means that you can protect your assets from creditors by transferring them out of your name into protective entities like trusts and foundations. If you don’t technically own the asset then it becomes much harder for other people to try and take it from you via a lawsuit. This is one of the main  reasons for structures  like trusts and foundations   – in the first place.

You can take this strategy a step further by transferring placing the assets you transferred to your trust or foundation in to separate entities – like corporations or limited liability companies (LLC). By having each asset in a separate entity you silo the risk related to that asset. If an asset, like a rental property, were be the subject of a lawsuit, the plaintiff would sue the LLC that owns it and the only thing that would be at risk is the rental property in the LLC. The assets in the other entities owned by your trust or foundation were be safe.

This strategy can be pretty complex if you own assets across multiple countries. So, it’s a good idea to speak with an international tax advisor. This advisor will be able to recommend which corporate structures and entities are best for you, depending on which countries you’re operating in.

Strategy 2: Use Strategic Debt 

If you own a very expensive home (or homes) then you might feel like you’re walking around with a target on your back. For example, if this home is worth $5 million then bad actors might try and take it for any number of reasons. But, what if this home was only worth $50,000? Then creditors would not be nearly as interested in it. This is the power of using strategic debt to reduce the value of your assets.

Strategic debt is when you make your assets look more unattractive in the eyes of the law by making them essentially worthless. Just like in our example above, you can reduce the value of your home by attaching a hefty amount of debt to it. So, how can you do this?

  1. 1. Home Equity Line of Credit: By taking out a Home Equity Line of Credit (HELOC) on your property, you can effectively reduce the amount of equity you have in your home. This is the example that we saw above.
  1. 2. Investment Property Mortgage: If you own investment properties, you can use mortgages to strategically reduce the value of these assets. Suppose you have an investment property valued at $2 million. By taking out a mortgage of $1.9 million on this property, the remaining equity is only $100,000. Creditors are less likely to target a heavily mortgaged property because the liquidation value is minimal after paying off the mortgage.
  1. 3. Business Loan Secured by Property: If you own a business, you can secure a business loan using your property as collateral. For example, if you have a business property worth $3 million, you could take out a business loan of $2.8 million secured against this property. This effectively reduces the net equity to $200,000, making it less appealing to creditors looking to seize valuable assets

This is not an exhaustive list of ways that you can reduce the value of your assets. So, for more personalized tax advice, be sure to reach out to the Esquire Group to learn more.

Strategy 3: Purchase Insurance to Protect Your Assets 

These days, you can buy insurance for just about everything (including protecting yourself against an alien abduction). Luckily, there are also insurance plans that can protect you against a far worse threat than aliens – lawyers.

There are lots of different types of insurance plans that can help you protect your assets and business interests. A few plans to explore are: 

  • – Umbrella plans
  • – Errors and omissions insurance
  • – Professional liability/malpractice insurance
  • – Cyber liability insurance
  • – Personal and homeowner’s liability insurance

All of these plans could help protect you when creditors come knocking on your door. With so many plans available, it’s best to speak with a professional  to get a better idea of the best insurance plans to protect your assets. The team at Esquire Group can even help recommend insurance professionals in the countries where you have assets. That said, there’s one type of policy that we’d like to discuss: private placement life insurance policy. 

Private placement life insurance (PPLI) is a form of “permanent” variable universal life insurance that provides both a death benefit as well as cash value accumulation. This plan flips traditional life insurance on its head by prioritizing the cash value accumulation instead of the death benefit. If structured properly, a PPLI has the potential to create tremendous tax advantages in the form of tax-deferred growth of the cash value plus a tax-free death benefit to heirs. 

If you have excess cash sitting around then it may be worth converting this cash into a PPLI, which would help shelter it from creditors.

Strategy 4: Give Your Assets Away

Leveraging strategic gifts can be an effective way to pass down your estate tax-free (depending on your country of residence) while also shielding it from creditors. This strategy works a little bit like this: if you’re planning to pass down assets to your kids, grandkids, or other close relatives and friends then you might as well do it sooner rather than later. The sooner you pass down these assets, the sooner you put them out of reach for creditors and lawyers. After all, a lawyer can’t try to seize an asset that’s no longer yours.

It is often best to place assets in an entity, like an LLC, first and then give away parts of that entity. If done properly, this can reduce gift taxes due to valuation discounts and help protect your assets.

That said, it’s best to avoid giving away assets to other people to hold just so that they’re not in your name. In this case, a court or tax authority could consider to still be your assets and the person who owns them your nominee. 

Strategy 5: Change Your Lifestyle to Protect Your Assets

If you’re seriously concerned about lawyers coming after your assets then you might want to consider diversifying. We’re not just talking about diversifying your assets. We’re talking about diversifying your lifestyle.

Diversifying your lifestyle can allow you to take advantage of tax incentives offered by different countries (while avoiding tax-heavy countries). This concept, often referred to as Flag Theory, encourages the idea that you should go where you’re treated best. A few small ideas for getting started are:

  1. 1. Setting a trust or foundation in another country;
  2. 2. Holding assets in a bank account outside of your home country;
  3. 3. Moving your company’s location to another country;
  4. 4. Obtaining a second passport.

Diversifying your lifestyle this way can make it much harder for creditors to come after you. For example, if you live in the USA and all your assets are in the USA, a US court has jurisdiction over both your and your assets. If you were to lose a lawsuit, a court could order your assets transferred to the plaintiff to satisfy the judgment.

If, however, you lived in the USA and had a UAE trust with a Swiss brokerage account, a US court would have no jurisdiction over the trust or the Swiss brokerage account. The plaintiff would need to sue in the UAE to get access to the trust assets as well as in Switzerland. 

It is easy to see how much protection flag theory can provide.

Getting Started With Flag Theory

Getting started with Flag Theory can be a cumbersome process, so you’ll definitely want to speak with a tax professional before getting started. However, check out this list by Incorporations.io to learn a bit more about which countries might be a good fit for a Flag Theoy lifestyle.

The goal is to find countries that offer a low tax rate or have specific laws that help protect you from creditors. The right countries for you will depend on your specific goals when it comes to protecting your assets. 

Making these changes to your lifestyle may seem a bit dramatic. But, Flag Theory is one of the most potent strategies for protecting your assets.

Strategy 6: Leverage Retirement Accounts

One thing that many people don’t know is that retirement accounts are protected from lawsuits in many countries. Depending on the country, lawyers can come after your business assets, investment accounts, bank accounts, or brokerage accounts. But, they cannot touch your retirement account.

With this in mind, it’s a good idea to explore whether or not you can protect your assets by transferring them to your retirement account. This small, yet effective step could be the difference between losing a valuable asset. However, it’s important to understand the tax consequences of transferring assets to a retirement plan..

We hope that you’ve found this article valuable when it comes to learning 6 strategies that you can leverage to protect your assets from lawsuits and creditors on a global scale.

Esquire Group helps multinational high-net-worth individuals and their families secure their wealth by structuring their affairs to minimize taxes and protect their assets for the next generation. If you’re interested in learning more about planning your estate then please schedule a consultation to learn more.

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