top of page

Why High-Net-Worth Individuals Need Strategic Asset Protection and Estate Planning

By Daniel Ehrlich

​

In today's complex financial landscape, entrepreneurs, professional athletes, and celebrities face unique challenges in preserving and transferring their wealth. With substantial assets often comes substantial risk—from lawsuits and creditors to tax implications and family complications. Understanding how to protect what you've built isn't just prudent financial management; it's essential for securing your legacy.

The Vulnerability of Success

Success brings visibility, and visibility can attract unwanted attention. High-net-worth individuals face elevated risks that others may not encounter:

Professional athletes, whose careers are remarkably short (averaging 3-6 years in major sports), must compress a lifetime of earnings into a brief window. This compressed earning timeline creates unique planning challenges, especially as 78% of NFL players face financial difficulties within two years of retirement.

Entrepreneurs typically have wealth concentrated in their businesses, creating significant exposure if those businesses face challenges. Their wealth is often illiquid and closely tied to their personal brands or expertise.

Celebrities and public figures live under constant scrutiny, making them attractive targets for frivolous litigation. Their personal lives become intertwined with their professional value, requiring sophisticated protection strategies.

Core Considerations for Asset Protection

Asset protection isn't about hiding assets or evading responsibilities—it's about legally structuring ownership to minimize unnecessary risks. Here's why it matters:

1. The Litigation Target

When your net worth becomes public knowledge, you become what attorneys sometimes call a "deep pocket." Research shows high-net-worth individuals are 262% more likely to be named in lawsuits than the general population.

Consider the professional athlete who purchases rental properties as investments. Without proper structuring, a slip-and-fall at one property could jeopardize not just that property but their entire portfolio of investments and personal assets.

2. Business and Personal Asset Separation

For entrepreneurs especially, separating business assets from personal assets is fundamental. This isn't simply about creating a corporation or LLC—it requires ongoing discipline in maintaining that separation.

The courts regularly "pierce the corporate veil" when business owners commingle funds, fail to follow corporate formalities, or undercapitalize their entities. Such mistakes can transform what should be limited liability into unlimited personal exposure.

3. Protecting Family Wealth

For high-net-worth families, asset protection extends to protecting family members from each other—and sometimes from themselves. This includes:

  • Protecting assets from divorce (both your own and your children's)

  • Creating structures that prevent heirs from squandering inheritances

  • Establishing governance systems for family businesses that survive generational transitions

The statistics are sobering: 70% of wealthy families lose their wealth by the second generation, and 90% lose it by the third generation.

Essential Estate Planning Considerations

Estate planning addresses what happens to your assets when you're no longer here to manage them. For high-net-worth individuals, this planning takes on additional dimensions:

1. Tax Efficiency

The federal estate tax exemption ($13.61 million per individual in 2024) may seem substantial, but for successful entrepreneurs, athletes, and celebrities, estates can quickly exceed this threshold. Without proper planning, estates above this amount face a 40% tax rate on the excess.

For business owners, this can force heirs to liquidate portions of the business just to pay the tax bill—potentially destroying what took a lifetime to build. Strategic planning can minimize this impact through tools like:

  • Irrevocable life insurance trusts (ILITs)

  • Grantor retained annuity trusts (GRATs)

  • Family limited partnerships (FLPs)

  • Strategic charitable giving

2. Legacy Preservation

For public figures whose names and likenesses have commercial value, estate planning includes:

  • Managing intellectual property rights

  • Protecting and monetizing image rights posthumously

  • Continuing philanthropic missions and foundations

  • Preserving privacy when public records are created during probate

Consider Michael Jackson's estate, which has generated over $2 billion since his death through careful management of his catalog and image rights—far more than he earned during his lifetime.

3. Business Succession Planning

For entrepreneurs, the question isn't just who inherits the business but who continues running it. Comprehensive succession planning addresses:

  • Leadership transition strategies

  • Buyout mechanisms for partners or family members

  • Liquidity planning for heirs who won't be involved in the business

  • Governance structures that preserve the founder's vision while allowing for evolution

Only 30% of family businesses survive into the second generation. Of those that fail, 60% do so because of communication issues and inadequate succession planning—not due to business or economic factors.

Modern Asset Protection Strategies

Today's high-net-worth individuals need sophisticated structures that balance protection with flexibility. These might include:

1. Domestic Asset Protection Trusts (DAPTs)

Available in 19 states, these trusts can protect assets from future creditors while potentially allowing some continued access to the assets by the original owner. They represent a middle ground between giving assets away entirely and maintaining complete control.

2. International Protection Structures

Offshore structures in jurisdictions like the Cook Islands or Nevis can provide substantial protection because they operate under different legal systems that don't automatically recognize U.S. court judgments.

However, these require careful implementation and ongoing compliance with U.S. tax reporting requirements, including Foreign Bank Account Reports (FBARs) and Foreign Account Tax Compliance Act (FATCA) regulations.

3. Hybrid Business Structures

Multi-entity structures like holding companies that own operating entities, or series LLCs that segregate different assets into legally separate "cells," can contain liability to specific assets rather than exposing entire portfolios.

The Cost of Neglecting Protection and Planning

The consequences of inadequate planning are well-documented:

Whitney Houston's estate faced years of probate complications and tax challenges that significantly diminished her $20 million estate.

Prince died without a will, leading to a six-year probate process, tens of millions in legal and administrative fees, and substantial tax consequences that could have been avoided.

NBA star Allen Iverson, who earned over $200 million during his career, reportedly faced financial difficulties after retirement due to inadequate financial management and asset protection.

Conclusion: Protection as an Ongoing Process

Asset protection and estate planning aren't one-time events but ongoing processes that evolve with changes in:

  • Your personal and family situation

  • The businesses and investments you own

  • Tax laws and regulations

  • The jurisdictions where you live and do business

The most successful wealth preservation strategies are those that adapt with these changes while maintaining their core protective functions.

For entrepreneurs, athletes, and public figures, the time to implement these strategies is now—ideally before success brings heightened scrutiny and risk. As the ancient proverb reminds us: The best time to plant a tree was twenty years ago; the second-best time is today.

​

bottom of page