asset protection planningn.
Reviewed by Owen Hathaway, AttorneyUpdated June 4, 2026Arranging ownership of assets in advance and lawfully so they are harder for future creditors to reach, done before a claim arises rather than after.
Asset protection planning is the lawful, advance structuring of how a person owns assets to reduce their exposure to future creditors, lawsuits, and judgments. Tools include entities such as LLCs, certain irrevocable trusts, exemptions, and insurance.
Timing is everything: protection must be in place before a claim arises. Transfers made to dodge a creditor who already has a claim can be unwound as fraudulent (voidable) transfers. Legitimate planning is proactive, not reactive.
Colorado offers meaningful protection through entity charging-order rules and a robust homestead exemption, but does not authorize self-settled domestic asset protection trusts. Wyoming is a leading asset-protection jurisdiction, allowing self-settled (qualified) spendthrift trusts and strong LLC protections.
Related terms
- charging orderA creditor's remedy against an owner's interest in an LLC or partnership: the creditor can intercept distributions but generally can't seize the business or run it.
- limited liability companyA business structure that shields its owners' personal assets from the company's debts and lawsuits, while staying simpler and more flexible to run than a corporation.
- domestic asset protection trustA self-settled irrevocable trust allowed in certain states that can shield the person who created it from their own future creditors, something most states, including Colorado, don't permit.
- fraudulent transferA transfer made to put assets out of a creditor's reach, which a court can undo. The modern statutory term is voidable transaction.
- irrevocable trustA trust that generally cannot be changed or revoked after it's created. Giving up control is the price for benefits like asset protection and tax planning.