How to Protect Assets in California

How to Protect Assets in California

Asset protection is a type of legal planning that keeps your property safe from creditors and lawsuits. Asset protection is completely legal in California and it is important to protect assets in California, especially if you have worked hard to accumulate money and properties. An asset is something that is owned by you or something that is owed to you (a loan owed to you). Examples are a home, financial securities (stocks, bonds), gold & silver, jewelry, and items like this.

California holds 17 percent of national net worth, while making up only 12 percent of the U.S. population. Asset protection strategies are a smart way to ensure that your wealth is preserved for your personal use and for the benefit of your family.

Asset protection is not just for the wealthy, though it is a common strategy that financial planners and estate planning lawyers often make sure to set up for their wealthy clients. Business owners and people that work in professions prone to lawsuits (doctors, lawyers, contractors, etc.) are also common candidates for this.

What are Common Asset Protection Strategies in Carlsbad?

You can use various strategies to protect your assets in Carlsbad, California. No one method is right for everyone. As a qualified estate planning lawyer, Andrew Fesler can discuss your options and help you determine the best strategy to meet your needs.

Below is a list of the most common asset protection strategies used in Carlsbad.

  • Register Your Business as a Limited Liability Company (LLC)

If you are a business owner, registering your company as an LLC may be a smart move. An LLC is a business structure that protects business owners from personal liability. Business creditors cannot reach the owner’s personal property to satisfy claims. In contrast, if your business is structured as a sole proprietorship or partnership, your personal assets (such as your house, vehicle, investments, and personal bank account) may not be protected. 

In addition, to LLCs, Family Limited Partnerships (FLPs) are another business structure that provides asset protection. You should consider creating an FLP if two or more family members own the business.

  • Create an Asset Protection Trust

Asset protection trusts are a type of irrevocable trust that hold an individual’s assets with the primary purpose of shielding them from creditors. Irrevocable trusts move the property from the creator’s control and ownership to the trust. It is a separate legal entity from the creator; therefore, a creditor cannot take the trust property to fulfill the creator’s obligations. Typically, irrevocable trusts cannot be modified or terminated without the permission of the beneficiaries or by an order of the court.

There are two main types of asset protection trusts:

  • Domestic Asset Protection Trusts. Domestic asset protection trusts (DAPT) are created under U.S. laws. In general, California does not authorize the creation of a DAPT. However, you can create qualified personal residence trusts, spendthrift trusts, and blind trusts to shield your assets.
  • Foreign Asset Protection Trusts. Foreign asset protection trusts (offshore trusts) are created in a location outside of the U.S. (e.g., Cook Islands, Caymans, Belize, Nevis, and Seychelles). They offer significant advantages but must be carefully established and managed to avoid problems with the IRS.

Additionally, asset protection trusts avoid estate and inheritance taxes. If you have a high net worth, these tax savings can be significant. Instead of being eaten up by taxes, your wealth will be preserved for future generations.

  • Create a Private Retirement Plan

California law allows residents to create a private retirement plan that can include a private retirement trust. Property identified as retirement assets is protected from bankruptcy and creditors, regardless of their IRS qualification. The retirement assets are protected both in the plan and when they are distributed. There is no maximum limit on contributions to your private retirement plan.

  • California Homestead Exemption

California offers a homestead exemption that protects home equity from an owner’s creditors up to a certain dollar amount. The exemption is between $300,000 and $600,00, depending on the county. The homestead exemption is only permitted on an individual’s principal residence (not rental properties or second homes). The exemption automatically applies in California, but you can file a homestead declaration with the County Clerk for additional protection.

  • Draft a Prenuptial or Postnuptial Agreement With Your Spouse

Prenuptial and postnuptial agreements can help protect your assets if you get divorced. California is a community property state. Generally, this means that any property acquired during the marriage by either spouse is presumed to be equally owned by both spouses. If you get a divorce, the court will divide the community property 50/50. However, in a prenuptial or postnuptial agreement, you can keep assets separate from the marital estate.

Your Carlsbad Asset Protection Attorney

Andrew Fesler is an experienced Carlsbad estate planning attorney with over twenty years of experience. He is a qualified lawyer and can create an asset protection plan that fits your needs. He can look at estate planning tools that can help you to protect assets in California. Contact our office today at (760) 444-0943 for a free consultation.

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Kathy S.

Mission Bay


Andrew provides excellent professional work, and is very kind and understanding, which is an extra bonus! Especially when the work required is difficult for a client in many ways.

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Carlsbad, CA 92008


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