As the pandemic weighs on the economy, make sure assets are protected

Bill Cass, CFP®, CPWA®

Bill Cass, CFP®, CPWA®, 06/17/20


With the economic downturn resulting from lockdown measures to contain the COVID-19 pandemic, nearly 40 million people have filed unemployment claims. While Congress has approved trillions in aid for individuals and businesses under the CARES Act, the stimulus relief may not be sufficient.

Since April, studies indicate that some savers are already withdrawing from retirement accounts or planning to use those funds for bills and daily living.

In the current environment, it’s even more important for investors to establish an asset protection plan. Given the economic downturn and other factors, there will likely be a rise in bankruptcies and litigation.

It is not too late for individuals to use asset protection strategies to protect their assets from potential creditors.

Bankruptcies jumped in the Great Recession

Personal bankruptcies increased significantly during the Great Recession. Consider that the total number of personal bankruptcies filed in 2007 was 775,344. In the years that followed around the financial crisis of 2008 and the subsequent Great Recession, the annual totals quickly escalated to well over one million each year. It’s likely the pandemic crisis will have a similar, or even worse impact.

bankruptcy filings

Asset protection

Asset protection strategies are an important part of a comprehensive financial plan. Individuals should review their current plan for asset protection and discuss strategies with an advisor and legal professional. There are numerous strategies available using insurance, state homestead protections, and titling of assets. An advisor can also provide guidance on advanced strategies such as irrevocable trusts, business ownership, offshore and domestic trusts, and liability insurance. For more details on the range of strategies that can be used to protect assets from potential creditors, please see Putnam's "Asset protection checklist."

There are a range of strategies for investors to consider. Putnam's investor education piece, "Asset protection: Basic principles and strategies for safeguarding your wealth," provides more details.

Fundmental strategies

  • Insurance coverages including umbrella liability policies
  • Retirement and college savings accounts
  • State homestead protections
  • Life insurance and annuities
  • Titling of assets
Advanced strategies
  • Irrevocable trusts
  • Business ownership forms such as corporations or LLCs
  • Using LLCs to own real estate
  • Offshore and domestic asset protection trusts (DAPTs)
  • Business or professional liability insurance coverage
Start planning today

To begin a plan, individuals may want to use this Asset Protection Checklist, and gather information before meeting with an advisor.

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