Shielding What Matters Most: An Introduction to Asset Protection Planning
In today’s litigious world, protecting what you’ve built is no longer optional—it’s essential. Whether you’re a business owner, investor, licensed professional, or simply someone focused on preserving your family’s wealth, asset protection planning should be a fundamental part of your estate and financial planning strategy.
At ALTA Estate Services, we help clients safeguard their assets before problems arise—because by the time a lawsuit or creditor claim is filed, it may already be too late.
What Is Asset Protection Planning?
Asset protection planning involves using legal structures and strategies to insulate your personal and business assets from future liabilities. The key word here is “future”—asset protection must be done now, before a liability may arise. Trying to shield assets after legal trouble appears on the horizon may be too late because the asset protection plan must be in place before any liability arises. Note: Revocable Trusts offer NO asset protection.
Why Consider Asset Protection?
Even those with the best intentions can find themselves on the receiving end of a lawsuit or financial dispute. Some common risk scenarios include:
- Personal injury claims (e.g., car accidents or slip-and-fall incidents)
- Business-related liability (e.g., contract disputes, employee issues)
- Professional malpractice lawsuits
- Real estate investment risk
- Divorce or family law claims
- Creditors pursuing unpaid debts
Without an asset protection plan in place, all your personal assets, including your personal residence, bank accounts, business interests, or retirement savings could be vulnerable. Our goal is to put a legal firewall between your assets and any potential threats.
Common Asset Protection Strategies
There is no universal solution—every client’s plan should be customized to their risk profile, goals, and the types of assets they want to protect. Below are some of the most effective strategies we use.
- Business Entity Formation: Your First Line of Defense
One of the most powerful ways to protect assets is by operating your business through a legal entity, such as a Limited Liability Company (LLC), or Family Limited Partnership. Doing business under your personal name or as a sole proprietor leaves all of your personal assets exposed to business liabilities.
Here’s how each entity type can serve your protection plan:
- Limited Liability Companies (LLCs): LLCs are ideal for small businesses, professional practices, and real estate investors. They offer strong liability protection, operational flexibility, tax advantages, and estate asset transfers upon your death. Members of an LLC are not personally liable for the company’s debts or legal judgments.
- Limited Partnerships (LPs): LPs have at least one general partner (usually you and your spouse through a separate and simple LLC management company) who manages the business and is personally liable, and one or more limited partners (usually your heirs or your family trust) who are passive investors and enjoy protection from liability. LPs are often used in investment contexts or estate planning.
By forming and maintaining the right entity, you can:
- Protect your personal assets from lawsuits, liabilities, and debts
- Protect investment property or property in separate legal entities
- Maintain tax planning flexibility
The entity must be properly maintained—this means separate finances, up-to-date documents, and corporate formalities. A poorly managed LLC or corporation can be “pierced” in court, putting your personal wealth back on the table. This is why you will need our assistance. The FLP is a great asset protection plan, but you cannot do this yourself. Generally, there are no maintenance requirements or fees under Arizona law.
- Family Limited Partnerships (FLPs)
A Family Limited Partnership (FLP) is one of the most effective and flexible tools for safeguarding family wealth, especially when asset protection is a key concern. Properly structured, an FLP not only facilitates generational wealth transfer and estate planning but also offers a powerful layer of protection against lawsuits, creditors, and divorce claims.
An FLP consists of:
- General Partners (GPs) – usually the parents or heads of the family, who retain control over the management and decision-making of the partnership.
- Limited Partners (LPs) – typically children or other family members, who hold passive ownership interests but have no authority to manage or control the assets.
How FLPs Protect Assets
The strength of an FLP lies in the legal separation between ownership and control, as well as the restrictions placed on creditors by law.
Key Asset Protection Benefits:
- Charging Order Protection: If a limited partner is sued, a creditor cannot seize partnership assets. Instead, the creditor may only obtain a “charging order,” entitling them to any distributions the limited partner receives—but the GP can lawfully choose not to make distributions, rendering the charging order virtually useless. This discourages creditors from pursuing collection and increases your negotiating leverage, especially since they are now required to pay the tax consequences of all profits of the FLP without receiving any income from the FLP. This is known as “Phantom Income” and the reason no creditor would ever sue the FLP or you, in the first instance.
- No Voting or Management Rights for Creditors: Even if a creditor gets a charging order, they have no say in how the FLP operates. They cannot vote, force the sale of partnership assets, or demand changes in the business.
- Asset Consolidation & Segregation: Real estate, investment accounts, and business interests can be consolidated into an FLP, placing them under a single protective structure. Alternatively, different asset classes can be placed in separate FLPs to further isolate risk.
- Prevents Direct Ownership by Family Members: By holding assets through the FLP instead of giving them outright to children or heirs, you protect those assets from their personal creditors, lawsuits, or divorcing spouses. FLPs can be especially valuable in protecting inherited wealth.
- Privacy and Control: Since limited partners have no access to the underlying assets or records, the FLP keeps financial matters private and maintains centralized decision-making with the general partner(s).
Important Considerations
FLPs must be properly formed and operated under state law, with clear partnership agreements, compliance with partnership formalities, and separate banking and accounting. Courts can “pierce the veil” of an FLP if it’s used improperly or merely as a façade, or if the legal documents are not created properly.
For high-net-worth families, business owners, or real estate investors, FLPs can serve as a legal fortress—protecting wealth from external threats while allowing for strategic succession planning and control retention.
- Irrevocable Trusts (not a great choice—you lose control)
Irrevocable trusts are powerful tools for removing assets from your personal ownership—once transferred, those assets are no longer legally yours and can’t be reached by your creditors. These trusts are commonly used for:
- Estate tax planning
- Life insurance ownership
- Medicaid qualification
- Gifting strategies
The problem with Irrevocable Trusts is you lose control of your estate planning. You cannot change or modify your beneficiaries for any reason at a later date. With the FLP, you retain complete control over all issues and can change or modify your desires at any time.
Legal and Ethical—Not Hidden or Fraudulent
Asset protection planning is 100% legal and ethical when done properly. It’s not about hiding assets or deceiving creditors—it’s about using the law to your advantage and planning wisely before problems arise. Timing is everything: once a lawsuit is filed or a judgment is entered, your options become limited.
Start Before You Need It
If you wait until a crisis hits, it’s likely too late. The best time to protect your assets is now, while the skies are clear. Whether you’re launching a business, expanding your investments, or just want to protect your family’s future, we’re here to help.
Build Your Fortress with ALTA Estate Services, LLC
At ALTA Estate Services, LLC, we provide clients throughout Arizona with customized asset protection strategies built on sound legal principles and practical experience. Schedule a consultation today to secure what matters most—your assets, your business, and your legacy.
📍 Serving clients throughout Arizona
📞 (520) 797-1400
📧 mark@altaestate.com
🌐 www.altaestate.com
Asset Protection Planning by ALTA Estate Services
The goal of proper estate asset protection is to preserve and protect your hard-earned assets from loss due to creditor action, probate, courtrooms, and lawyers, as well as Medicaid asset, spend down. Asset protection is a critical part of any proper and complete estate and/or business plan.
Should you die without proper estate planning and asset protection the courts, government and lawyers will get a substantial amount of your wealth otherwise intended for your family and loved ones.
Should you ever need long-term care or assisted care, you and your family will face the Federal Medicaid and Arizona State ALTCS Spend down liquidation of your assets.
If you are in business, you must protect yourself and your family assets from potential lawsuits from creditors.
A proper and complete asset strategy provides financial security for you and your family members against potential hardships in the future.
ALTA Estate Services, LLC incorporates asset planning in all of its estate and business planning efforts through proper and complete legal documents. ALTA provides its clients with the peace of mind to know that through such complete planning and document preparation that their future financial security is protected.
Visit BUSINESS and LTC for additional information on these topics. Learn more about Mark Fishbein.
