That describes asset protection.
A substantial industry run by expensive professionals will scatter your money between interlocking partnerships and off-shore corporations to keep it away from those who might sue you.
And, of course, a bunch of your money lands in their pockets.
All to keep your assets safe from unexpected, catastrophic lawsuits.
For most of us, we don’t need to go there: Uncle Sam lays out the first step in asset protection.
Retirement plans safe from creditors
Federal law puts pensions, 401(k) plans, and employee benefit plans beyond the reach of even a creditor with a judgment.
Any plan qualified under ERISA has an anti alienation clause that forbids transfer of plan benefits, except to the beneficiary.
It takes no special set up, no costly maintenance, just regular savings in an appropriate plan to put your retirement assets beyond the reach of a financial catastrophey.
If you file bankruptcy, ERISA qualified accounts don’t even come into the bankruptcy estate.
It takes a plan
To get the protection of law for retirement savings, they have to be in a plan.
It doesn’t work to merely label an asset or an account as your “retirement plan”. It needs to be part of a federally recognized plan for tax advantaged retirement savings.
I can’t tell you how many of my bankruptcy clients tell me that their small business or their expensive home is their retirement plan.
That’s not a plan, it’s a pipe dream.
And any non exempt equity they have in either of those assets is available for creditors. Worse, a creditor with a judgment can force the sale of non exempt assets, and leave you with the tax bill for capital gains, etc.
Employer match swells account
Employers seldom just hand you cash to save for retirement, but they do frequently match your contributions to a 401(k) plan. That match represents an immediate 50-100% return on your money.
Again, all tucked away where no taxes are due on its growth and beyond the reach of creditors.
Until you’ve maxed out your ERISA qualified retirement savings, don’t fret about finding other forms of asset protection.
Uncle Sam, in this regard anyway, has your back.