Why Asset Protection Is No Longer Optional

Legal disputes aren’t just something that happens to “other people” anymore. Whether you’re running a business, owning rental property, or simply building your nest egg, the risk of being pulled into a lawsuit is real—and growing. I’ve seen it firsthand in my work with clients across the country, especially in states where litigation risk is baked into the environment.

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The good news? You don’t need to live in fear—but you do need a plan. Asset protection is about taking smart, legal steps today to protect what you’ve worked so hard to build. It’s not about hiding money or playing defense—it’s about being proactive, thoughtful, and prepared.

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Why Asset Protection Planning Matters

Asset protection is a legal and financial strategy designed to shield your personal or business assets from potential claims by creditors, lawsuits, or judgments. It’s not about hiding money—it’s about planning ahead so that in the event of a dispute, your most valuable resources aren’t exposed.

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A lot of folks assume their insurance will cover them if something goes wrong—but that’s only part of the picture. In my experience, real asset protection means layering different strategies so they work together. Think of it like building a wall with more than one line of defense—it’s that extra structure that helps keep your wealth truly secure.

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Tools and Structures That Help Shield Wealth

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LLCs and Other Business Entities

Limited Liability Companies (LLCs) remain one of the most accessible and effective asset protection tools, especially for small business owners and real estate investors. An LLC separates personal assets from business liabilities, helping to protect your home, savings, and retirement accounts if your business is sued.

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Corporations and Limited Partnerships (LPs) offer similar protections, though they come with more formal requirements. The right structure depends on your goals, your industry, and how many parties are involved in ownership.

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Trusts Built for Protection

Certain trusts—such as spendthrift trusts and irrevocable trusts—can provide powerful protections against creditors. A spendthrift trust restricts a beneficiary’s access to trust assets, preventing them from using the funds recklessly or assigning them to others, including creditors.

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Indiana's "Legacy Trust" law, enacted in 2019, allows individuals to establish self-settled spendthrift trusts, providing a means to protect assets from future creditors. However, it's important to note that there is a two-year statute of limitations before assets in the trust are protected. This means that assets transferred into the trust are not safeguarded from creditors' claims until two years have passed since the transfer.

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Lifetime asset protection trusts, often established for adult children or vulnerable heirs, can safeguard assets from lawsuits, divorce proceedings, and bankruptcy. Irrevocable Life Insurance Trusts (ILITs) are also common tools used to keep insurance proceeds out of the taxable estate and out of reach from creditors.

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Statutory Exemptions and Legal Protections

State and federal laws offer a number of automatic exemptions that protect certain assets:

• Homestead Exemptions: Many states offer homestead exemptions that protect a portion of a homeowner’s equity from creditors in the event of a lawsuit or bankruptcy. The amount of protection varies by state and can range from tens of thousands to several hundred thousand dollars, depending on state law and specific circumstances. These exemptions are a key tool for shielding primary residences from certain types of claims.

• Retirement Accounts: Assets held in ERISA-qualified retirement plans like 401(k)s are generally protected from creditors under federal law. However, Traditional and Roth IRAs are protected only in bankruptcy proceedings, with exemptions up to $1,512,350 as of 2023. It's crucial to understand that outside of bankruptcy, state laws determine the level of protection for IRAs.
  
  
• Personal Property Exemptions: Items such as household goods, vehicles, and tools of the trade may also receive limited protection from creditors, depending on their value.
  
  

Understanding which of your assets fall under these protections—and how to enhance them—can help you build a resilient personal financial plan.

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Insurance: The First Line of Defense

No asset protection strategy is complete without insurance. The right policies can reduce your exposure to risk and provide a financial backstop if litigation occurs.

• Umbrella Insurance: Adds extra liability coverage beyond standard home and auto policies. It’s a cost-effective way to increase protection without changing your base policies.
  
  
• Professional Liability Insurance: Critical for doctors, lawyers, consultants, and others who provide advice or services that could lead to a claim.
  
  
• Landlord Insurance: For real estate investors, this covers liability stemming from tenant disputes or property-related incidents.
  
  

These policies should be reviewed annually to ensure coverage levels reflect your current asset base and risk exposure.

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Why Proactive Planning Is Key

The most important asset protection move you can make is to plan before there’s a problem. Once a legal claim is pending, moving assets can raise red flags and even lead to charges of fraudulent transfer. Courts look more favorably on strategies implemented during times of financial stability. Here are some steps you can take to enhance asset protection:

1. Regularly Review and Update Your Estate Plan

Life changes, and so do laws. Regular reviews ensure that your asset protection strategies remain effective and aligned with current regulations.

2. Maintain Proper Documentation

Accurate records can substantiate the legitimacy of asset protection structures, demonstrating that they weren't established to defraud creditors.

3. Consult with Professionals

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Engage with legal and financial experts familiar with Indiana's asset protection laws to tailor strategies to your specific needs.

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Conclusion

In today's environment, where legal challenges can arise unexpectedly, safeguarding your assets is paramount. Indiana residents have access to a range of tools—from trusts and LLCs to insurance policies—that can provide robust protection. By proactively implementing these strategies and staying informed about state-specific regulations, you can ensure that your wealth remains secure for years to come.​

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To learn more about asset protection strategy, email Terry@DuPontAdvisory.com, call (800) 234-4452, or schedule a discovery call.

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Sources

Indiana Department of Local Government Finance
IRA Financial Group
Investopedia