Removing the Target from Your Back: Real Asset Protection Planning

A common concern people have when it comes to asset protection is simple: “I don’t want to be a target.” The fear of lawsuits or creditor claims is very real, especially for individuals who appear to have deep pockets. Fortunately, with the right planning, you can reduce the risk of becoming a target and protect your assets more effectively.

Who Becomes a Target?

It’s not only the ultra-wealthy who face lawsuits. Many professionals and business owners are at risk, including:

• Doctors and medical professionals

• Lawyers and CPAs

• Engineers and entrepreneurs

• Celebrities and public figures

• Business owners of all sizes

In many cases, it’s not just about what you actually own — it’s about what others perceive you own. If the perception is that you have wealth, you could become a target.

Why More Insurance Isn’t Always the Answer

One physician recently explained that while he was encouraged to increase his malpractice and umbrella insurance for protection, he noticed a troubling trend. The doctors he knew who were sued often had the highest insurance coverage.

Why? Because high coverage signals to potential plaintiffs and their attorneys that there’s money available to collect. In other words, insurance can sometimes make you more of a target, not less.

The Real Solution: Own as Little as Possible

The best way to deflect creditor claims is to minimize what you own in your personal name. This doesn’t mean you can or should simply transfer all assets into a trust overnight — that could trigger fraudulent transfer laws. Instead, the goal is to strategically move assets out of your personal ownership and into stronger legal structures over time.

Fraudulent Transfer Laws and Why They Matter

Simply dumping all assets into a trust while leaving yourself with nothing raises legal red flags. Courts can undo those transfers if they’re deemed fraudulent or intended to cheat creditors.

That’s why good planning involves:

• Clear, legitimate reasons for the trust (estate planning, business succession, or wealth transfer)

• A gradual, strategic approach to moving assets

• Documenting intent and compliance with applicable laws

This balance is both a science and an art.

Long-Term Planning with South Dakota Trusts

South Dakota is one of the few states that allows self-settled irrevocable trusts. These trusts let you transfer assets for your own benefit while still receiving strong legal protection.

Key features include:

• You establish the trust, fund it with your assets, and remain a beneficiary.

• Personal creditors cannot easily access assets held in the trust.

• Planning is more effective when done before lawsuits or creditor issues arise.

For entrepreneurs, starting a business inside a trust allows the company — and its growth — to remain protected from day one.

Cost vs. Benefit

Setting up an asset protection trust requires upfront investment: legal fees and administrative trustee fees. It’s not necessary for everyone. But if you’re in a high-risk profession or building significant wealth, the protection far outweighs the costs.

The Takeaway

You may never fully eliminate the perception of being a target. But with strategic planning, especially using South Dakota self-settled irrevocable trusts, you can create strong legal barriers. These barriers make it far less attractive — and often not worth the effort — for creditors to pursue you.

The best time to implement this planning? Before problems arise.

Frequently Asked Questions (FAQs)

Q: What does it mean to “remove the target from your back”?
It means structuring your assets so you’re less appealing to creditors or plaintiffs. If they see little in your personal name, they’re less likely to pursue claims.

Q: Do I need to give up control of my assets?
No. With South Dakota’s directed trust structure, you can retain control as the investment advisor while a trustee handles administration.

Q: Are self-settled asset protection trusts legal everywhere?
No. Only a minority of states allow them, and South Dakota is widely considered the strongest jurisdiction for this type of trust.

Q: How soon should I set up a trust?
Before any lawsuit or creditor issue arises. Waiting until trouble begins may trigger fraudulent transfer rules.

Q: Is insurance still necessary?
Yes. Insurance covers claims and settlements, while trusts limit what creditors can reach. They work best together.

Q: Is this strategy only for the ultra-wealthy?
No. Professionals, entrepreneurs, and business owners of all levels use asset protection trusts to safeguard their wealth.