Think of asset protection planning as a game. Follow the rules and you may avoid detours through lawyers’ offices and courtrooms.

Rule 1: What you can touch, your creditors can touch. A creditor might be a business partner, someone you clipped with your car or an ex-spouse. The planning response to Rule 1 is to limit your own access to your stuff just enough to keep your creditors’ mitts off of it, while allowing you pretty much full use and enjoyment of it.

Rule 2: Liability exposure flows two ways—toward your stuff and away from your stuff. Liability flowing toward your stuff: Somebody sues you because you creamed them with your car, so he or she gets a court order compelling the sale of your beautiful beach house in order to pay down the judgment against you.

An example of liability flowing away from your stuff: Somebody rents your beach house and is injured falling through the floorboards because you didn’t maintain the structure properly. Your tenant sues you, gets a $1 million judgment, takes your $450,000 beach house, and then wants to force a sale of your home or your business to pay off the rest of the judgment.

So the planning response to Rule 2 is to build walls between your assets and not let any of your assets slosh over them. Building the right walls is the essence of asset protection planning.

Scott Makuakane, Counselor at Law
808-587-8227 |