Blake Harris is an Asset Protection Attorney and Founding Principle of Blake Harris Law.
It’s hard to grasp the sobering feeling of seeing your home address in a court filing, or worse, watching a beloved property threatened by natural disaster until you’ve experienced it firsthand. The emotions—fear, disbelief and vulnerability—can be overwhelming. Real estate is more than a physical space. Home is where memories are made and the foundations of our futures are built. For many, our houses represent stability, comfort and a lasting legacy.
Protecting real estate and hard assets is more than just covering their financial values. It’s about safeguarding the intangible sense of security and peace that comes with knowing your loved ones are shielded from uncertainty. Whether it’s ensuring legal protections, securing comprehensive insurance or preparing for natural disasters, taking proactive steps is an investment in the safety of what matters most.
In the United States, we face a multitude of risks to our property. The economic burden of the tort system alone is staggering, estimated in 2022 at $529 billion annually, or 2.1% of GDP. On top of that, the frequency and severity of natural disasters are escalating, contributing to rising homeowner insurance costs, with the cost of claims per insured home in the United States outpacing inflation over the past 20 years.
If ignored, the growing risks to property can jeopardize your wealth and threaten your financial stability and security. Taking proactive steps to safeguard your assets can provide peace of mind and protect your family’s future.
Real Estate Risks
Real estate ownership can expose you to numerous liabilities. Tenant disputes, liability claims for accidents occurring on your property and even natural disasters are all risks that homeowners and investors face.
For instance, landlords may face lawsuits if tenants or visitors are injured on their property, potentially resulting in settlements or judgments that exceed insurance coverage. These situations can escalate quickly, leading to costly legal battles or significant financial losses.
Hard Asset Risks
Hard assets such as jewelry, art or precious metals are also at risk. Their high value makes them attractive targets in lawsuits, and without proper safeguards, they can be among the first assets creditors or litigants pursue in legal proceedings. Additionally, the lack of formal documentation for some hard assets can complicate their protection, leaving them vulnerable to legal claims or disputes.
Strategies For Protection
Because risks are multifaceted, protecting your assets generally requires a layered approach that balances fundamental strategies with more advanced tools. By combining essentials like insurance with sophisticated mechanisms such as LLCs and trusts, you can address diverse risks while tailoring your plan to fit your unique needs. Here are key approaches to consider:
Insurance As A First Layer
Insurance remains a foundational element of asset protection. Comprehensive policies for liability and property damage can cover many common risks, providing a first line of defense.
For high-value assets, consider umbrella insurance policies to extend your coverage and protect against larger claims. Additionally, specialized policies for unique assets, such as fine art or collectibles, can ensure tailored protection that standard insurance policies might not cover.
Single Member LLCs
A single-member limited liability company (LLC) is one of the simplest and most effective ways to shield real estate from personal liability. By holding properties within an LLC, you create a legal barrier that separates your personal assets from potential claims tied to the property.
This separation ensures that, in many cases, only the assets within the LLC are exposed to risk, not your personal wealth. For example, if a tenant sues over an injury, only the property owned by the LLC would be at stake, not your personal savings or home.
Domestic Asset Protection Trusts
Domestic asset protection trusts (DAPTs) are another tool for shielding wealth. These trusts are designed to protect assets from creditors while allowing you to retain some control over the trust’s administration and distributions. By placing assets such as real estate or valuable possessions into a DAPT, you can make them harder to access in the event of a lawsuit.
However, without a full understanding of their legal vulnerabilities, your assets may still be at risk. For instance, certain states may not recognize DAPTs created under the laws of another jurisdiction, and federal bankruptcy or other claims may penetrate these trusts under specific circumstances.
States like Nevada and South Dakota are particularly attractive jurisdictions for DAPTs due to their robust legal protections, shorter creditor “look-back” periods and favorable tax laws.
Importantly, you don’t need to reside in these states to establish a DAPT under their laws. However, the trust must be administered in the chosen state, typically through a qualified trustee or trust company, and must adhere to that state’s specific legal requirements. Understanding these nuances is critical to ensuring your assets remain protected.
Offshore Trusts
Offshore trusts provide the highest level of protection for individuals with assets usually ranging from $1 million to $20 million. By transferring assets to a jurisdiction with favorable trust laws, you create a legal structure that is exceedingly difficult for creditors to penetrate.
Offshore trusts are especially useful for high-net-worth individuals and families looking to secure their wealth against legal threats. Jurisdictions such as the Cook Islands, Nevis and Belize are known for their robust asset protection statutes, which can deter litigation altogether by making it prohibitively expensive and time-consuming for plaintiffs to pursue claims.
Effective Asset Protection
At its core, asset protection is a meaningful way to safeguard your future and demonstrate care for yourself, your loved ones and the legacy you’ve worked hard to build. An effective asset protection strategy combines flexibility and strength, allowing you to layer foundational tools like insurance with more advanced mechanisms tailored to your unique risks and circumstances.
To build a plan that fits your needs, consult a qualified law firm who can guide you through these domestic and international strategies and help give you financial peace of mind in a world of uncertainty.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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