Question: What's the single most useful technique available for asset protection?

Concerning asset protection, I would say there are two incredibly useful techniques. And both can often be easy to implement. First, you can choose to avoid risky behavior and risky environments. Second, you can choose to avoid other people engaging in risky behavior and working or residing in environments.

These common-sense techniques seem too simple given some of the other, more exotic asset protection schemes available. But they can protect you in ways that the other asset protection schemes can't. If you avoid dangerous activities, situations and people, you greatly increase your financial safety.

Question: Does asset protection work after the fact?

If your assets are already at risk for some event that's already occurred or will predictably occur in the near future, you may find it's too late for meaningful asset protection measures. Transferring assets to, say, a trusted friend or family member may be a fraudulent conveyance.

However, all that said, if you are already the target of either a creditor's collection actions or a lawsuit, you should confer with an attorney for help in defending your assets. He or she won't be able to provide you with as much asset protection had you gone to him or her before hand. But an attorney can still help you.

Question: Will a limited liability company give me asset protection?

Yes, probably. But you'll want to consult an attorney to make sure you're doing everything just right.

One thing to keep in mind--and again you will want to consult an attorney on this--is that an LLC, or limited liability company, will probably only insulate you from general business liability based claims against the LLC. Such a claim might be for a contract that the LLC signed with some third party. Claims against you directly won't be protected against because of the LLC.

Question: What does asset protection cost?

The simplest forms of asset protection--such a just being careful and just understanding how state bankruptcy and consumer protection laws protect individuals--cost nothing.

The next level of asset protection, which is good insurance, is also relatively economical. A good personal liability policy providing, say, a $1,000,000 of coverage is usually only a few hundred dollars a year. A good general business liability policy providing, say, $5,000,000 of coverage of the equivalent is probably around $1,000 (although you need to shop around and may pay more depending on your business).

Incorporating a business or investment probably costs a few hundred to a few thousand dollars in upfront setup. Incorporation (either as a regular corporation or as an LLC) also often results in on-going legal, banking and accounting costs that can run anyway from several hundred to several thousand dollars a year.

Family and offshore trusts, which provide potentially the highest degree of asset protection, probably cost at least many thousands a year (unless you've got an attorney and an accountant in the family). And large complex trusts with wide and varied investments and holdings could easily cost much more.

Question: Do you need an attorney's help for asset protection?

Not necessarily. For the simplest forms of asset protection (mentioned above) you just need to be careful.

To get insurance, you just talk to a trustworthy insurance broker.

You can set up an LLC yourself (although I usually recommend that if you're setting up an LLC for asset protection reasons that you use an attorney if only to get your questions answered).

Setting up trusts is something you should not, in my opinion, contemplate without the guidance of a good estate planning or asset protection attorney.

In short, you can make much progress yourself in the area of asset protection. But you'll want to get outside expert help for some of the more sophisticated forms of asset protection.

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