Frequently Asked Questions

Asset Protection Planning: Key Questions

How California residents and business owners can legally protect what they have built.

• What is asset protection planning? +
  Asset protection planning involves legally restructuring how you own assets to reduce their exposure to future creditor claims, lawsuits, and long-term care costs. Effective strategies use California and federal law to place assets beyond the reach of potential creditors — without hiding assets or committing fraud. It must be done proactively, before a claim or judgment arises.
• Does a revocable living trust protect assets from creditors? +
  No. Because you retain full control over a revocable living trust, its assets are treated as your own for creditor purposes. A revocable trust avoids probate but does not shield assets. For creditor protection, irrevocable trust structures, limited liability entities, or specific exemption strategies must be used instead.
• Can I protect assets after a lawsuit has been filed against me? +
  Transfers made after a lawsuit is filed — or in anticipation of a claim — can be challenged as fraudulent conveyances under California law and unwound by courts. Effective asset protection must be implemented before a claim arises. This is why proactive planning, ideally as part of a comprehensive estate plan, provides far more protection than reactive transfers.
• How does homestead exemption protect my California home? +
  California's automatic homestead exemption protects a significant portion of your home's equity from unsecured creditors in a bankruptcy or forced sale. The exemption amount is tied to the county median sale price. However, the homestead exemption has limits and does not protect against all types of creditor claims — it should be part of a broader strategy.
• What is the role of an LLC in asset protection? +
  Limited Liability Companies (LLCs) can be used to hold investment real estate or business assets, creating a legal barrier between those assets and personal liability. A creditor judgment against you personally generally cannot force the sale of LLC assets — they are limited to a "charging order" against your distributions. These structures require careful maintenance to remain effective.
• How does Medi-Cal planning relate to asset protection? +
  For many California families, the largest threat to accumulated assets is not a lawsuit but the cost of long-term care. Nursing home costs can exceed $10,000 per month, and without planning, Medi-Cal may recover from your estate after death. Medi-Cal asset protection planning — using irrevocable trusts and other strategies — is one of the most widely applicable forms of asset protection available to California families.