Asset Protection for Board Members: 10 Essential Strategies

Quick Summary

This article explores why asset protection is critical for board members, outlining 10 proven strategies to shield personal wealth from lawsuits and liabilities. Enhanced with practical examples and case studies, we provide actionable insights for safeguarding assets legally. Learn how Blake Harris Law can help you protect your wealth, including real estate, investments, and cryptocurrency, while maintaining compliance and financial privacy. Visit our blog for more insights. 

Are Your Assets Legally Protected as a Board Member?

Serving on a board comes with influence and exposure. Whether you sit on a corporate, nonprofit, or advisory board, your personal wealth could be at risk from lawsuits, regulatory claims, or even fallout from decisions you did not make directly. Directors and officers insurance helps, but it is not bulletproof, and it does not cover every scenario.

Asset protection is not just for billionaires. It is for any board member with something to lose, whether that is a home, investment portfolio, business interests, or crypto holdings. 

In this Blake Harris Law guide, we will explain why board members are vulnerable, what is at risk, and how to shield your wealth with legal strategies, supported by real-world examples and data. If you serve on a board, this article will help you protect what you have earned before a legal issue puts it at risk. 

Why Listen to Us?

At Blake Harris Law, we specialize in helping high-net-worth individuals, including board members with net worths between $3 million and $20 million, protect their wealth. From offshore trusts in jurisdictions like the Cook Islands, Belize, and Nevis to LLCs and crypto asset protection, we design legal strategies that preserve financial privacy and comply with U.S. laws.

Our four-step process: consultation, trust creation, funding, and ongoing monitoring, ensures tailored solutions for your needs.

Why Board Members Are at Greater Risk of Legal Exposure

Board members face unique risks due to their fiduciary responsibilities and high-profile roles. A Wyatt survey highlights the prevalence of lawsuits against board members:

• In companies with total assets covering $400 million to $1 billion, over 20% of board members have faced lawsuits at least once.
• The risk decreases for smaller companies, with those having assets of $50 million or less facing lower exposure.
• Companies with fewer than 500 shareholders have a risk about one-third that of companies with more than 500 shareholders.
• Shareholders account for 52% of lawsuits against directors, with employees, vendors, clients, and third parties also posing risks.

A notable case is Verret v. U.S., where the chairman of a nonprofit’s board was held personally liable for unpaid payroll taxes, despite not directly managing tax payments. This ruling underscores that board members can be deemed “responsible persons” under tax law, facing personal liability for organizational financial obligations. 

Another example is the Boy Scouts of America (BSA), which faces nearly 100,000 abuse-related lawsuits. As the BSA claims insolvency, board members risk personal exposure if insurance fails to cover claims, highlighting the severe financial implications of board service.

Recent trends also indicate that securities class-action lawsuits are on the rise, particularly in industries like technology and finance. A 2024 report by NERA Economic Consulting noted a slight increase in securities class-action filings, with many targeting corporate boards for alleged failures in oversight, especially regarding cybersecurity and data breaches. This underscores the evolving nature of risks for board members.

What Is Asset Protection for Board Members?

Asset protection involves using legal structures and strategies to shield personal wealth from lawsuits, creditors, and other claims. For board members, it means creating barriers between personal assets and liabilities arising from their role. This ensures that even if a lawsuit targets you, your home, savings, investments, and cryptocurrency remain secure.

When Can Board Members Be Held Personally Liable?

Board members can face personal liability in several scenarios:

• Breach of Fiduciary Duty: Failing to act in good faith or in the company’s best interests can lead to lawsuits. For example, approving a transaction that benefits you personally at the company’s expense could result in a breach of loyalty claim.
• Fraudulent Actions or Negligence: Engaging in or being complicit in fraudulent or negligent behavior can expose you to liability. For instance, failing to oversee financial reporting could lead to mismanagement claims.
• Violating Securities Laws: Non-compliance with securities regulations, such as insider trading or misleading financial statements, can result in personal liability.
• Personal Guarantees on Corporate Debts: Signing personal guarantees for corporate loans puts your personal assets at risk if the company defaults.
• Tax Liabilities: As seen in Verret v. U.S., board members can be held liable for unpaid taxes, particularly payroll taxes, if deemed “responsible persons.”

Another real-world example is Antuzis v. DJ Houghton Catching Services Ltd., where a director was held personally liable for inducing breaches of contract by acting in bad faith. These scenarios emphasize the need for proactive asset protection.

10 Key Asset Protection Strategies for Board Members

Here are 10 proven strategies to safeguard your personal wealth as a board member:

1. Offshore Asset Protection Trusts

Offshore trusts in jurisdictions like the Cook Islands, Belize, and Nevis offer robust protection by placing assets outside U.S. jurisdiction, making them difficult for creditors to access. For example, a board member concerned about shareholder lawsuits could place their real estate and cryptocurrency into a Cook Islands Trust. 

Consider this hypothetical scenario: an individual named Grant faced a lawsuit after a car accident. By placing his inheritance in an offshore trust with spendthrift provisions, he protected it from creditors while retaining control through his trustee. Blake Harris Law specializes in creating these trusts, while maintaining compliance with U.S. tax laws.

Offshore trusts are particularly effective for high-net-worth individuals due to their robust protection against creditors and lawsuits. U.S. courts have historically struggled to enforce judgments against assets held in offshore jurisdictions like Nevis due to the lack of reciprocal enforcement treaties and the protective legal frameworks in place.

2. Directors and Officers (D&O) Insurance

D&O insurance covers legal defense costs and settlements for lawsuits related to board roles. For instance, if a shareholder sues you for a decision made as a board member, D&O insurance can cover legal fees and settlements, protecting your personal finances.

In a hypothetical scenario, a board member of a tech startup faced a shareholder lawsuit over a failed merger. D&O insurance covered the $500,000 in legal costs, sparing their personal assets.

3. Limited Liability Companies (LLCs)

LLCs separate personal and business assets, protecting your wealth from business-related lawsuits. 

For example, a board member owning three rental properties could place each in a separate LLC. If a tenant sues over one property, only that LLC’s assets are at risk, not the others or personal savings. Maintaining separate bank accounts and formal records is crucial to preserve this protection.

According to Proweaver, about 42.9% of small businesses operate as LLCs, surpassing sole proprietorships and partnerships. Data from the IRS also shows that LLC filings have grown steadily, with millions of active LLCs registered across all 50 states, highlighting the popularity of this business model.

4. Domestic Asset Protection Trusts (DAPTs)

DAPTs, available in states like Nevada and Alaska, allow you to place assets in a trust while retaining some control. Unlike traditional trusts where the grantor often relinquishes control, a DAPT allows the grantor to be a discretionary beneficiary, depending on state laws. This structure offers significant benefits, particularly in protecting assets from creditors and lawsuits.

For example, consider a board member who has accumulated a substantial investment portfolio. By transferring these investments into a Nevada DAPT, they can shield the assets from potential creditor claims or legal actions without losing the ability to benefit from the income or gains generated by those investments. This protection can be crucial for individuals in high-risk professions or those exposed to potential litigation.

However, setting up and managing a DAPT requires careful planning to ensure compliance with both state and federal laws. 

Fortunately, Blake Harris Law specializes in evaluating whether a DAPT fits within your overall wealth management plan. Our experience can help navigate the complexities involved, ensuring that your assets are protected effectively while maximizing the benefits you receive from your investments.

5. Retirement Accounts

Assets in 401(k)s, IRAs, and similar accounts are often protected from creditors under federal and state laws. Maximizing contributions can safeguard significant wealth. 

For example, a board member facing a lawsuit could rely on their $1 million IRA being protected, as creditors typically cannot access qualified retirement plans.

Many states offer strong protections for IRAs, especially in bankruptcy cases. For example, federal law shields up to $1.5 million in IRA assets during bankruptcy.

6. Homestead Exemptions

Many states offer homestead exemptions to protect your primary residence from creditors. In Florida, the entire value of your home is protected. For instance, a board member in Florida could shield their $2 million home from bankruptcy claims, ensuring a safe haven for their most valuable asset.

Florida and Texas remain top-tier states for homestead protection. Florida offers unlimited value protection for homesteads up to 160 acres in a county or ½ acre in a municipality. It even allows debtors to convert non-exempt assets into protected homestead property, a feature not available in Texas. Texas also protects homesteads regardless of value, with acreage limits of 200 acres for families and 100 acres for individuals

7. Family Limited Partnerships (FLPs)

FLPs allow you to transfer assets to family members while retaining control, reducing personal exposure. 

For example, a board member might place their business interests into an FLP, with their children as limited partners. This protects the business from personal creditors while allowing management control. In a case study, Client B gifted assets to family members via an FLP, protecting them from potential claims by spouses or creditors.

8. Annuities

Converting assets into annuities can protect the principal from creditors. For instance, a board member might purchase an annuity with $500,000 of their savings, ensuring that annuity payments are secure even if a lawsuit arises from their board role.

According to LIMRA’s finalized data, total annuity sales rose by 12% in 2024, reaching a record $432.6 billion for the year. This marks the third consecutive year of record-breaking sales, fueled by growing demand for investment protection and guaranteed retirement income solutions.

The asset protection appeal was especially strong for products like:

• Fixed Indexed Annuities (FIAs): Up 31% to $125.5 billion
• Registered Index-Linked Annuities (RILAs): Up 38% to $65.4 billion
• Single Premium Immediate Annuities (SPIAs): Hit a record $13.6 billion

9. Umbrella Insurance Policies

Umbrella insurance provides extra liability coverage beyond standard policies. Its coverage typically extends beyond standard home and auto policies, covering personal injury, defamation, and legal defense fees.

For example, if a board member’s D&O insurance has a $1 million limit and a lawsuit exceeds this, an umbrella policy can cover the excess, protecting personal assets. This is particularly useful for high-stakes claims.

Umbrella insurance is widely recommended for high-net-worth individuals due to their increased exposure to liability risks, such as lawsuits stemming from property ownership, luxury vehicles, or public visibility. A 2024 whitepaper by Risk Strategies emphasizes that affluent individuals are more likely to be targeted in lawsuits and that umbrella policies offer critical protection against large verdicts and legal costs.

10. Cryptocurrency Asset Protection

Protecting cryptocurrencies is increasingly vital. Placing them in an offshore trust, such as a Belize Trust, can shield them from creditors. 

For example, a board member holding $1 million in Bitcoin could transfer it to a Belize Trust, governed by Belizean law, which offers strong protection against U.S. legal claims. Fortunately, Blake Harris Law provides tailored solutions for digital asset protection.

Safeguard Your Assets with Blake Harris Law

Board members face significant risks, from shareholder lawsuits to tax liabilities, as evidenced by cases like Verret v. U.S. and the BSA litigation. Without proper protection, your savings, property, investments, and cryptocurrency could be exposed. Legal tools like offshore trusts, LLCs, and insurance provide ethical ways to minimize these risks while preserving financial privacy.

At Blake Harris Law, we create personalized strategies tailored to your goals and risk tolerance, serving clients with net worths between $3 million and $20 million. Our team guides you through every step, from assessing vulnerabilities to establishing protections in jurisdictions like the Cook Islands, Belize, and Nevis. Whether protecting real estate, investments, or cryptocurrency, we ensure your wealth is secure and compliant with U.S. laws.

Ready to protect what you have worked hard to achieve? Contact us today to schedule your consultation.