If you own assets, such as a house or bank account, having a solid financial plan in place to protect them can give you peace of mind. Wondering what should be included in a financial plan to protect assets? Learn everything you need to know below.

What Is a Financial Plan?

A financial plan provides an overview of your money and gives you a strategy for the future. With a financial plan, you can answer questions about financial goals, such as:

  • Would you like to own a home? If you already own one, when will you pay off the loan?
  • How much money will you need to save if you want to marry or have kids?
  • If you have children, how will you pay for their education expenses?
  • How much money should you save for retirement?

Here’s What Should Be Included in a Financial Plan To Protect Assets

drawing an umbrella on top of a family figurine

Do you want to protect personal assets but don’t know where to start? Here’s what to include in your financial plan.


Life insurance is a necessity if you have a partner or children who depend on your income. It pays benefits to your family if you pass away.

Term life insurance pays benefits if you die during a certain period. On the other hand, whole life insurance pays a lump sum whenever you die.

You can also opt for income protection insurance, which pays your regular income if you’re too sick or hurt to work. Critical illness insurance pays benefits if you experience a heart attack, stroke, cancer, or other serious health condition.

Estate Planning

Estate planning isn’t only for older people. Accidents and illnesses can strike at any age, so plan for your future now.

An estate plan should include a will at the very least. You should also create a durable power of attorney and an advanced healthcare directive. These documents enable another person to make financial and medical choices on your behalf if you cannot speak for yourself.


Have you heard the saying, “Don’t put all your eggs in one basket”? That’s especially true when it comes to your investments.

Don’t only rely on your 401(k) or IRA to tide you over when you reach retirement. Diversify your portfolio to protect yourself if certain investments don’t yield results.

Emergency Fund

Without enough savings, an emergency can set back your retirement plans or even force you into bankruptcy. Always keep at least two months of living expenses on hand to cover small emergencies.

Ideally, you should save enough money to cover six months’ worth of living expenses. If you can’t do this just yet, it’s okay to start small. Try saving money for one month’s living expenses and increase your savings from there.

Risk Management

Annuities can protect against risks to your retirement income. An annuity works by providing regular payments in exchange for investing your money with an insurance company.

Why Is It Important To Protect Assets in a Financial Plan?

sweeping money

Without protection, your assets could be at risk if a creditor tries to collect on your debts. A single lawsuit, too, can wipe out everything you’ve worked so hard for.

Losing your assets doesn’t only affect you. It could mean you have less money to leave your loved ones when you die. You may be unable to afford a home or children. Such consequences can be devastating, which is why you need to put an airtight asset protection plan in place today.

Trusts in Your Financial Plan

If you’re asking, “What should be included in a financial plan to protect assets?” then you need to consider a trust. Creating a trust is a powerful strategy that allows you to:

  • Spare your family from the probate process after you die
  • Protect assets from creditors (with the right kind of trust)
  • Take advantage of tax savings
  • Control who inherits your money after your death
  • Plan for the future of children with special needs

Types of Trusts

You’ll find many types of trusts, but the two main ones are revocable and irrevocable trusts.

Revocable trusts allow loved ones to bypass probate, and you can change the terms at any time. However, this type of trust doesn’t protect assets.

If you want asset protection, you must choose an irrevocable trust. It can be possible but usually more difficult to change the terms once you’ve set them up, but the peace of mind can be well worth it.

How Trusts Protect Assets in Financial Plans

An irrevocable trust protects your assets because they are no longer directly owned by you. When you transfer assets to the trust, the trust itself owns them instead.

Benefits and Drawbacks

Trusts have several benefits and drawbacks to consider. One of the biggest benefits is the ability to avoid probate. Trusts also allow you flexibility in who inherits your assets and how much. You’ll also have limited liability if you appoint a corporate trustee.

Still, setting up and maintaining trusts can be expensive, especially if you have a complex asset portfolio. You’ll also need to choose a reputable trustee to manage your assets. If you pick the wrong trustee, it could spell major legal and financial problems for you.

Using Offshore Trusts To Protect Assets in a Financial Plan

Offshore trusts often have a dubious reputation, but when set up properly, they offer a perfectly legal way to protect your assets.

Why Use Offshore Trusts?

Domestic trusts may seem safe, but they won’t necessarily protect your assets if someone comes after you with a lawsuit.

Offshore trusts keep your assets out of the jurisdiction of U.S. courts. A trust in a foreign country doesn’t have to release your assets just because a judge in America tells the trustee to do so.

If someone wants to attack your assets, they would need to file a lawsuit in the jurisdiction of your trust. That’s a complicated and expensive process, so it’s likely that potential litigants won’t even bother to try.

Jurisdictions for Offshore Trusts

Many offshore jurisdictions make it cost-prohibitive for someone to file a lawsuit against you. St. Kitts and Nevis, for example, requires creditors to post a $100,000 bond before launching a lawsuit. And if they lose, they’ll have to pay their own court costs.

The Cook Islands is another great option. This nation forces creditors to show that you acted fraudulently beyond a reasonable doubt. The Cayman Islands offer some protection too.

Other strong offshore jurisdictions include:

  • Bahamas
  • Belize
  • Mauritius
  • Cyprus
  • Luxembourg

Risks and Benefits of Offshore Trusts

One risk of having an offshore trust is thinking you can use it to evade taxes. You may have heard stories of shady businesses using offshore trusts to do just that.

But when assets in your trust earn money, you’ll still need to pay taxes on those earnings to the IRS. If you don’t, you put yourself at high risk of an IRS audit. When that happens, you could end up paying hefty penalties.

Creating an offshore trust protects you from lawsuits. However, offshore trusts aren’t right for everyone. Those who can benefit from an offshore trust include:

  • People or companies with more than $500,000 in assets
  • Doctors, lawyers, and other professionals who need to worry about malpractice lawsuits
  • Construction companies and contractors
  • Corporations subject to product liability beyond what insurance covers

Choosing a Trustee and Offshore Trust

handshake between a trustee and settlor

For asset protection with an offshore trust, you’ll need to meet the following requirements:

  • You must create an irrevocable trust
  • You (the settlor) can’t serve as the trustee
  • The trustee needs to be a financial institution or foreign trust company, not an individual
  • The trustee must have the discretion to withhold payment from beneficiaries
  • The location of the trust must govern trust provisions
  • Trust protectors should not be located in the U.S.
  • The trust may own your assets directly or through an LLC that you can control when not under legal duress

To set up your trust:

  1. Choose an offshore trust jurisdiction
  2. Pick a trustee company
  3. Provide all documents the trust company requires
  4. Work with your attorney to draft an offshore trust document
  5. Transfer domestic assets to your offshore account

Factors To Consider

Choosing the right jurisdiction is critical when creating an offshore trust. Some countries may be more likely to comply with U.S. court decisions, putting your assets at risk of seizure.

For financial security, choose a jurisdiction with favorable debtor laws and strong trustee regulations. As mentioned above, the Cook Islands, St. Kitts and Nevis, Belize, and the Cayman Islands make it difficult for creditors to come after your assets.

Next, you’ll need to choose a trustee. This can feel overwhelming and a bit scary because you’re putting your assets in someone else’s hands. How can you know whether a trustee is reputable when they’re located thousands of miles away?

Look for a trust company with a long history and solid reputation. Ask the trust company how your trustee will defend you if creditors try to come after your assets.

If you’re uncomfortable choosing a trust company and trustee, an asset protection lawyer can handle this to put your mind at ease. Your lawyer will also help you choose the right jurisdiction for your needs.

How Can Tax Planning Help Protect Assets in a Financial Plan?

If you’re not careful, taxes can drain the assets you’ve worked to build up over the years. Thorough tax planning can help you save money and shield hard-earned assets for your family’s future.

Tax-loss harvesting is one strategy to consider. With this strategy, you sell an investment that has declined in value and replace it with a similar alternative. You’ll realize an investment loss but generate a deduction that lowers your tax burden.

It’s also wise to diversify your assets among non-taxable and taxable accounts. To pay less, put tax-inefficient investments into tax-advantaged accounts. This saves you money because the more your investments earn, the higher the taxes you’ll pay.

When you reach retirement age, you’ll need to put a withdrawal strategy in place. Depending on your financial situation, you can choose a proportional or traditional approach.

With a proportional strategy, you withdraw a certain percentage of your retirement account’s value each year. This approach keeps your annual tax bills fairly stable.

For a traditional approach, you withdraw funds from accounts in this order:

  1. Taxable accounts
  2. Tax-deferred accounts
  3. Tax-exempt accounts

This allows your tax-advantaged accounts to grow for as long as possible before making withdrawals.

Common Mistakes To Avoid When Creating a Financial Plan

an emergency fund in a jar

When asking, “What should be included in a financial plan to protect assets,” keep the following common mistakes in mind.

Failing To Save for Emergencies

Even if you have excellent health insurance, a single emergency could cost you thousands — possibly even millions — in unexpected medical bills. You could also lose your job at any time, and without that paycheck, you and your family could face serious financial distress.

Going without an emergency fund is a risk you should never take. You may be unable to stash away hundreds per month, but every penny saved helps.

Not Saving Early On

Ideally, you should start setting aside money for retirement as soon as you begin your career. Far too many people skip early investing because they think retirement planning can wait until later.

But the money in your retirement accounts grows every year. For example, just $3,000 in your IRA could grow to $60,000 over 30 years.

If you drag your feet on retirement planning, your investment will be worth far less.

Not Buying Insurance

If you have a spouse or kids who depend on you, you can’t afford to go without life insurance. Even a hefty savings account won’t tide them over forever. When you die, life insurance pays your dependents money they can use for rent, mortgage payments, bills, and anything else they might need.

Don’t assume workers’ compensation will cover everything if you’re hurt on the job. Disability insurance can supplement workers’ comp by paying a portion of your income until you can go back to work.

It’s a common mistake to skip out on insurance if you rent a house or apartment. Renters insurance pays to replace your things if someone steals them or you lose them in certain natural disasters. It also covers medical bills if someone hurts themselves at your home.

If you’re older, you might also want to consider long-term care insurance, which pays for care in your home, a nursing home, or an assisted living facility.

Failing To Review Your Financial Plan Regularly

Don’t create a comprehensive plan and then forget all about it. You should review your plan once per year or whenever you experience a major life event, such as marriage, divorce, or the birth of a child.

When you go over your plan, review the following:

  • Asset allocation in your portfolio
  • Insurance coverage
  • Emergency savings
  • Savings rate compared to your short- and long-term goals
  • Contribution rates to tax-advantaged and taxable accounts

Not Working With a Financial Advisor

Even experienced investors can benefit from the guidance of a financial advisor. Without one, you could make emotion-driven decisions that cost you a lot of money.

Financial advisors keep their finger on the pulse of the market. If a stock’s value suddenly plummets, your financial advisor can tell you whether it’s better to sell or wait for things to stabilize.

Identifying Risks to Your Assets

healthy and rotten lemons

Risks include anything that can take away your assets or lower their value. For instance, if you own shares of a company that goes bankrupt, you could lose the value of your stock.

If you own a business, any actions it takes could put your assets at risk. Investing in a new product might make sense now, but what happens if the product fails?

Market volatility can put your assets at risk, too. Assets worth millions today could lose value overnight if something goes wrong. You can’t control the market, but you can stay ahead of potential problems with the help of a financial advisor.

You’ll also need to worry about potential lawsuits. An asset protection attorney can shield your assets before someone tries to sue you.

When asking, “What should be included in a financial plan to protect assets,” it’s always smart to consider your risks. Contact Blake Harris Law to learn more about asset protection today.