How to Protect Your Financial Kingdom

 March 10, 2023

By  Kyrie Mattos

Whether you’ve gained your assets from business, marriage, or inheritance, you need to protect your financial kingdom from the threat of claims against your estate after you die. Having the right asset protection strategies in place can help guard your professional and personal finances against unwanted claims. 

Here are some tips on the legal tools available to legally protect the assets you’ve worked so hard to build from business creditors, spouses, and probate.

How to Protect Your Assets in a Business

There are a lot of inherent financial and legal risks in business. Owners often face claims and lawsuits from creditors, vendors, and other third parties who can threaten their business and sometimes personal assets.

Smart business owners understand that many things go into running a successful business, so they prioritize having comprehensive asset protection strategies in place.

Three key aspects of an effective business asset protection strategy are choosing the right entity formation, using strong limitations of liability clauses in your legal agreements, and investing in business insurance.

Choose the Right Entity Formation

When starting a business, the first step owners usually take to formally set up the business entity. Only certain types of entities will shield personal assets from creditors and other business-related claims, which is why it is critical to choose the right entity formation.

If you choose to form your business as a corporation or limited liability company, then the owners, officers, and directors won’t have personal exposure or liability for business debts, contract disputes, or claims by employees or third parties.

On the other hand, if you’re a general partner in a partnership or run your business as an independent contractor, you are personally liable for all of the debts of the partnership or business. That’s why partnerships and freelancers need to pay special attention to the limitation of liability clauses in their agreements. 

Use Limitation of Liability Clauses

Every business contract needs to have a strong limitation of liability clause. A limitation of liability clause is a contract provision that precludes or caps the financial exposure of parties in the event of a lawsuit. 

A general limitation of liability clause will have language stating that no party to the contract will be liable to another for any indirect, incidental, consequential, special, or punitive damages, including loss of revenue, profit, income, or savings.

It’s also important to review all business contracts and get rid of any provision that tries to make you pay the other party’s attorney’s fees. Your contracts should make it clear that each party is responsible for their own legal fees and costs if there’s a contract dispute. 

If there are other kinds of liability related to the specific nature of your business, like infringement claims, make sure your agreements limit your exposure against those sorts of claims.

Invest in Business Insurance

Business insurance is an essential part of a company’s asset protection strategy. Like other kinds of insurance, business insurance means owners won’t be personally liable for the different things that can go wrong. Also, like other insurance, different policies cover different types of claims.

Professional liability insurance covers owners, officers, and other professionals from claims of negligence, errors and omissions, claims of mismanagement, or other misconduct in the course of running the company or carrying out a professional duty.

Workers’ compensation insurance is a state law requirement for businesses with employees. Workers’ comp makes it possible for employers to compensate employees for injuries or illnesses contracted while on the job.

General liability insurance protects against claims made by customers and other third parties for personal injuries, property damage, and even copyright infringement.

The cost of business insurance can be expensive, but it’s worth the investment to make sure your personal and business assets are protected.

How to Protect Assets in a Marriage

It used to be taboo to talk about finances and marriage. Today, however, lots of people contemplating marriage understand the importance of talking openly and honestly about their income, assets, and liabilities, especially since financial issues are the second-leading cause of divorce. 

Marital agreements are very helpful when one or both people have substantial assets they want to protect, but they’re also a useful tool when both are bringing debt into the marriage.


The most common marital agreement is the prenup. A prenup is a written agreement between couples stating how their assets and liabilities will be divided in a divorce or when a spouse dies. 

In addition to dividing property and debt, prenups can also address spousal support, known in some states as alimony or maintenance, but in many states, a prenup can’t dictate child-related issues like child support or educational expenses. 

Post-marital agreements

Although not used as often as prenups, post-marital agreements are another way to protect assets in a marriage.

There can be any number of reasons for entering into a post-marital agreement. They are sometimes used to restrict assets due to a spouse’s infidelity or financial irresponsibility. Other times, they provide financial protection to a spouse who stopped working to care for children or who acquired an inheritance. 

Post-marital agreements can also include provisions that determine how assets will pass in the event a spouse dies during the marriage. These provisions can specify which assets and property a spouse will or won’t receive at death and will always include a waiver of spousal rights to inherit. 

Using post-marital agreements this way as an estate planning tool will have the effect of nullifying a spouse’s claims to the deceased person’s property under state law or a will.

How to Protect Assets After Death

A common goal for people who seek estate planning is to avoid probate when they die. Probate is the court process that manages the estate of a deceased person to make sure all debts are paid before distributing the remaining assets to beneficiaries and heirs.

Here are some tools to help keep your property and assets away from creditors and make sure it goes to the people you intend to have them.

Life Insurance Agreements

Life insurance is one of the easiest and most affordable ways to provide financial protection for your loved ones after you die. That’s because life insurance proceeds are automatically paid to the named beneficiaries and, therefore, can’t be reached by your creditors.

There are different types of life insurance policies that can fit every situation and budget.

You may just be looking for straight-term life insurance that pays a death benefit if you die during the policy term or just covers funeral expenses. There’s also whole life insurance that has savings and investment components. This will allow you to accumulate cash and add to the value of the policy. 

You can get life insurance with no waiting period and without a medical exam.

People often overlook life insurance as a way to protect their financial situation, but depending on the type, it can be a considerable asset for your family that will be protected from your debts.

Trust Agreements

Another way to protect your assets from creditors is by putting your assets in a trust. A trust is a legal entity that holds the property of the person creating the trust. Trusts are managed by a trustee, who has a fiduciary duty to protect and direct the use of assets on behalf of the trust’s beneficiaries.

The two most popular trusts are revocable and irrevocable trusts. Both types can help protect your assets from creditors, claims, and lawsuits. The main difference is that a revocable trust can be changed or revoked at any time before you die. An irrevocable trust can’t be amended once it’s created.

Regardless of which trust you choose, to protect your property, you must make sure your assets are actually put into the trust. Otherwise, the assets won’t legally be owned by the trust and will be made part of your probate estate and available to pay your debts.

To prevent inadvertently leaving property and assets out of the trust, you should consider using a special type of will in conjunction with your trust called a pour-over will. A pour-over will is a legal document that automatically transfers all assets owned outside of the trust into the trust when you die.

The Right Legal Tools Can Help Protect Your Assets

In summary, having the right legal tools in place in your business, marriage, and estate plan can help guard your finances against unwanted claims. Those tools include:

  • Including life insurance and trust agreements in your estate plan
  • Setting your company up under a legal structure that offers personal liability protection
  • Using contracts to limit business liability or to divide property in a divorce

Lauren Blair writes and researches for the insurance site, QuickQuote.com. She has over 25 years of experience in litigation.

Kyrie Mattos


{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}