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How to Secure Your Assets Against Legal Threats

Posted by James Burns | May 04, 2024 | 0 Comments

Introduction: Did you know that according to a study conducted by the American Bar Association, over 55% of Americans will be involved in some form of litigation in their lifetime? With such a high likelihood of legal entanglements, it's crucial to take proactive steps to safeguard your assets against potential threats. In this comprehensive blog post, we'll delve into effective strategies to protect your wealth and investments from legal risks, drawing on both expert advice and relevant legal precedents.


  1. Establish a Trust:
    • Actionable Tip: Set up a revocable living trust to shield your assets from probate and potential creditors. Additionally, consider an irrevocable trust for heightened protection, as it removes assets from your ownership, making them more difficult to seize in legal proceedings.


    • Mistake to Avoid: Neglecting to regularly update the trust document can render it ineffective. Ensure your trust accounts for changes in your financial circumstances and relevant laws to maintain its asset protection benefits.


    • Relevant California Case Law: In re Marriage of Haines (1995) 33 Cal.App.4th 277 highlights the importance of properly maintained trust documents in asset protection during divorce proceedings.


  1. Diversify Your Investments:
    • Actionable Tip: Expand your investment portfolio across various asset classes, including stocks, bonds, real estate, and alternative investments like commodities or cryptocurrencies. This diversification minimizes the impact of any single legal dispute on your overall wealth.


    • Mistake to Avoid: Failing to periodically rebalance your portfolio can lead to overexposure to certain assets or industries. Regularly review and adjust your investment allocation to maintain a balanced and resilient portfolio.


    • Example: Imagine you own a substantial stake in a single company. If that company faces a lawsuit, your entire investment could be at risk. Diversifying into various assets can provide a safety net.


  1. Obtain Sufficient Insurance Coverage:
    • Actionable Tip: Conduct a comprehensive review of your insurance policies to ensure adequate coverage for potential legal liabilities. Consider umbrella insurance policies to provide additional protection beyond the limits of your primary policies.
    • Mistake to Avoid: Underestimating the value of insurance can leave you vulnerable to substantial financial losses in the event of litigation. Consult with an insurance expert to assess your coverage needs accurately.


    • Relevant California Statute: California Civil Code §1714 establishes the principle of negligence liability and underscores the importance of insurance in mitigating legal risks.


  1. Create a Business Entity:
    • Actionable Tip: Form a limited liability company (LLC) or corporation to separate your personal assets from business liabilities. Establishing a distinct legal entity for your business activities can shield your personal wealth from potential lawsuits.


    • Mistake to Avoid: Failing to maintain proper corporate formalities, such as holding regular meetings and keeping accurate financial records, can weaken the liability protection afforded by your business entity. Adhere to corporate governance requirements to preserve asset protection benefits.


    • Relevant California Case Law: Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal. App. 2d 825 is a landmark case in California regarding piercing the corporate veil.


  1. Utilize Exemptions and Consider Foreign Asset Protection Tools:
    • Actionable Tip: Leverage exemptions provided by California law to safeguard specific assets from creditors' reach. Strategic transfers of assets to family members or entities can further shield them from legal threats.


    • Explore Foreign Entities: Consider establishing a foreign asset protection trust or a foreign LLC in jurisdictions with favorable asset protection laws. These entities offer additional layers of protection, such as a higher burden of proof for creditors and the need to relitigate judgments in foreign courts, providing enhanced safeguards for your assets.


    • Relevant California Statute: Utilize exemptions provided under California law, such as those outlined in California Code of Civil Procedure §§ 704.010-704.210, to protect assets from creditor claims.


  1. Stay Informed About Legal Developments:
    • Actionable Tip: Stay abreast of changes in California laws and regulations that may impact your asset protection strategies. Engage with legal professionals, attend seminars, and subscribe to relevant publications to remain informed.


    • Mistake to Avoid: Assuming that once implemented, asset protection measures are static and immune to legal challenges. Regularly reassess your strategies in light of evolving laws and personal circumstances to maintain optimal protection for your assets.


  1. Private Placement Life Insurance (PPLI):


  • Private Placement Life Insurance (PPLI) is a powerful tool for asset protection, offering wealthy individuals a unique blend of investment and insurance benefits within a tax-efficient framework.


  • Positive Features: PPLI policies provide a customizable structure that allows policyholders to invest in a wide range of assets, including hedge funds, private equity, and real estate, often not available in traditional insurance products. Additionally, PPLI offers enhanced privacy and confidentiality compared to other investment vehicles.


  • Asset Protection: PPLI safeguards wealth by placing assets within a life insurance policy, protecting them from creditors and legal threats. The policyholder's assets are held within a tax-deferred insurance wrapper, shielding them from income and capital gains taxes until withdrawal.


  • How it Works: Assets contributed to a PPLI policy grow tax-free, and the death benefit is generally exempt from income and estate taxes. Furthermore, policyholders can access the policy's cash value through tax-free loans or withdrawals, providing liquidity while preserving the tax-advantaged status of the investment.


  • Benefits: PPLI policies offer flexibility, allowing policyholders to tailor the investment strategy to their unique goals and risk tolerance. Moreover, the death benefit can provide liquidity to heirs, bypassing the probate process and ensuring a seamless transfer of wealth.


  • Considerations: While PPLI can be a valuable tool for asset protection and tax efficiency, it's essential to work with experienced professionals to structure the policy effectively and comply with regulatory requirements.


  • Integration with Other Strategies: PPLI can complement existing asset protection strategies, such as trusts and LLCs, by providing an additional layer of protection and tax optimization for high-net-worth individuals.


Action Steps: Are you seeking expert legal guidance to fortify your assets against legal threats? Entrust your asset protection needs to the Law Office of James Burns. With over 24 years of experience, Attorney James Burns specializes in tailored asset protection strategies designed to safeguard your wealth and investments. Call us today at (949) 305-8642 or visit to schedule a consultation.

About the Author

James Burns

Estate Planning, Asset Protection, Business and Real Estate Transactions, nutraceutical Law and franchising:


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