Asset Protections Within Your Whole Life Policy

About this Episode

Are you aware of your life insurance asset protection? Beyond the historical consistency, tax favorable growth, and liquidity, this is another benefit of the Wealth Maximization Account that most clients are surprised by. In this episode, host, Patrick Donohoe, discusses asset protection strategies and how they can benefit you during some of the most litigious times in history.

Key Takeaway Timeline

  • 1:48 – What litigious times can mean for your financial assets
  • 4:01 – There is no such thing as absolute asset protection
  • 5:24 – Common asset lawsuit processes
  • 8:12 – Favorable asset protections of life insurance

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Asset Protections In Your Whole Life Policy

Many of our clients at Paradigm Life come to us because of the Perpetual Wealth Strategies’ ability to help them grow their wealth and also maximize income later in life. The Wealth Maximization Account, which is this uniquely funded whole life policy that sits at the foundation of our strategy is there because of a few things. First, its historical consistency that gives a high degree of certainty compared to other strategies about the future. Also, its tax favorable treatment, growth and the ability to pass it on income tax-free. Also, it’s a liquidity provision, mostly through the policy loan. Its legacy benefits, which secures a permanent financial legacy from day one. However, there are many other characteristics that this type of structure has that most of our clients are surprised by as they learn about it. That’s the case with this topic, which is asset protection. We’re going to talk about the various protection measures that you have in place as you’ve established this type of strategy. How these protections would work in our day and age, which I would consider as more of the litigious times in history.

Many years ago, I remember talking to an individual. This is before I started Paradigm Life. I’m new in business, but I’ll never forget the conversation. We talked about a lot of stuff. There’s one thing in particular that stuck with me. It had to do with the question I asked him which was, “What are the things that keep you up at night?” This individual is very well off. He had a successful construction company. He also develops property, owned a lot of property. His answer was surprising. He told me that it isn’t necessarily something happening on his construction site or it isn’t losing a contract. It was that somebody would follow him from his home and intentionally crashed their car into him or damage his property intentionally in order to sue him.

I found it surprising. As I have learned more about business over the years and have done business with thousands of people, I’ve learned about where this anxiety comes from. It’s because of how litigious our society is. What I mean by litigious is how simple it is somebody to sue another. There are lots of instances in which people make a living out of this. There are whole law firms that go out and create class action lawsuits for various reasons and some are justified, some aren’t. That’s not the point, talking about what’s justified and what’s not. It’s to essentially talk about something that’s important, especially as you small business owners or entrepreneurs. Those that have essentially take on more liability associated with your business and your practice, which puts at risk the success that you’ve had, the financial assets that you’ve purchased and accumulated.

I want to talk about how the insurance policy relates to that. First, before I go any further. I’m not an attorney and a lot of what I have learned comes from three people, one is Jay Adkisson who’s considered one of the foremost experts on asset protection in the United States. Also, Jeff Verdon and Garrett Sutton and all of them. I know in their books, it states that there’s no such thing as absolute asset protection. There are ways in which you can set up the ownership of assets and the structure of assets and remove as much liability as possible. If somebody wants to pay the money, then they can ultimately break most structures apart. However, the structure itself will essentially frustrate the process and stall the process so that there is a proper time and collaboration effort so that you can properly negotiate, talk through and settle if there, in fact, is a liability.

The more successful, the more wealthy you are, the more liability that you have. Click To Tweet

One of the best ways to protect against this type of liability is liability insurance. Whether it’s an umbrella liability insurance, which umbrella means covers the lack of liability coverage and the various insurance policies that you have, mainly car insurance and homeowners insurance. It gets down to the entity structure of your assets. Life insurance has very favorable asset protection measures in most of the 50 states, but it’s not the same in all 50 states. You’re going to want to know the state that you live in and what those protection measurements are.

What is it protecting you from? Let me get a little bit more detailed on this idea of being sued and what a judgment is so that you can get some perspective if you don’t have it already. If you do something that harms somebody else and you may not have done it intentionally. It may have just been your property or somebody breaks a leg on your property or hurts themselves on your property. You bear liability. The more successful, the more wealthy you are, the more liability that you have. It could even be the government, accreditor, a private person, a company who can sue you for damages. We have lots of laws, so there are a number of ways in which damages can be proven.

We’ve seen some ridiculous lawsuits out there like getting burnt by drinking coffee and suing McDonald’s. That’s one of the more famous ones, but there are a lot of those instances that are out there. I don’t know if it’s possible to know where you have liability but you can take precautionary steps in order to protect what you have worked so hard to acquire it and establish as your financial plan, statements, assets and so forth. When something happens, you’re sued and there are documents brought forth to a court of law. There are damages there. It might be a violation of contract.

It might be something with the property. Somebody got hurt because they say that you’re at fault, then the judge typically will settle in favor of one party or another party. Let say it’s not in your favor, and then judgment is established. In that judgment, there’s typically a financial damage amount and that can be used to take an asset. Whether it’s a bank account or lien of a property, it could also garnish wages as well. The idea is that when somebody has this judgment, typically what the attorney will do is they will do an asset search. Some attorneys won’t get paid unless they do collect on assets. Asset searches are becoming a lot easier because of technology and being able to look at the different state’s registry of property or the public record.

Asset Protections: The only way that someone can know about you owning an insurance policy is by being summoned to court and having to state under oath that you own this particular asset.

An attorney does an asset search and finds all the different property that’s in your name. It could be cars, homes, property or business interests and so forth. When they do that, that’s when they’re able to strategize and take the judgment that they’ve won, go out and claim your property. Am I getting an asset protection strategy with regards to other assets? From a policy standpoint, here are some of the benefits that you have. First off, a policy is a private contract between you, a private person and a private company. There is no public record. The only way that someone can know about you owning an insurance policy is by being summoned to court and having to state under oath that you own this particular asset. That’s one of the first layers that you have is the fact that this is private and it’s not going to show up in any asset search.

Second, let’s say from a layering perspective. Each state has its own laws associated with the asset protection of a policy and what is susceptible to creditors. Most states have very favorable laws. You’re going to want to check your specific state for those specific laws. The third layer is the nature of insurance. A person owns the insurance, but it’s not for their benefit inherently. It’s for the benefit of somebody else. The nature of a life insurance policy is that something has to happen to you in order for that benefit to payout. It’s to pay out to beneficiaries who are not you.

Therefore there is a justification of it not necessarily being an asset that’s yours. There are a lot of other things that you can do. A number of years ago, there was an irrevocable life insurance trust type of setup where it removes the specific insurance policy ownership outside of your specific estate. Those types of structures, in the beginning, were very limited. Now, there’s a lot more flexibility and laws have changed. You can own insurance inside of an irrevocable type of trust. That also is another extra layer of protection. For all of these types of strategies, reach out to your wealth strategist. We have a strategic network that is very familiar with asset protection strategies if you consider yourself liable in a sense or want to look into ways in which you can protect your assets more.

That’s one of those benefits of a policy. I know several individuals who went through some hard times during 2008, 2009 and bank accounts were frozen. They were being garnished and their insurance policy was ultimately the financial vehicle that they use in order to take loans and pay bills. Looking at how this specific characteristic can benefit you, you may have never experienced it before. If you have experienced it before, I’m sure this episode can resonate or has resonated with you. For those of you who haven’t been sued before or have not gone through that type of experience, you might in the future and may not understand the value, but just keep it in the back of your mind that this is a tool that can be favorable and beneficial to you if you face that type of situation.

Asset protection in this day and age are becoming more relevant, especially for those who are becoming more and more successful. Click To Tweet

We’ve reviewed various protections of the policy. There are many different characteristics and benefits that it has to you as part of the Perpetual Wealth Strategy. It’s one of these benefits that some learn about in the process, some learn about later. Hopefully, if this is your first time, then you’ll be more informed and can see even more benefits associated with what you have set up. All the resources, everything that I’ve mentioned, I’ll put some book references and people references as far as our strategic network is concerned. Head over to and it will have that information.

It’s been a fun brief discussion that we could definitely go off on many different tangents on this topic. Asset protection in this day and age is becoming more relevant, especially for those who are becoming more and more successful. Make sure that you take the proper steps and precautions to secure your assets, starting with good liability insurance on your homes, cars, person and your business. Other measurements can be taken beyond that depending on your specific situation. Next time we are going to get into the idea of And Asset, which has been mentioned in previous episodes. It’s going to talk about insurance policy. The Wealth Maximization Account is not just a single benefit type of set up, but there are many benefits. One of the most profound benefits is that this is an asset that grows and does its job. It has everything that I’ve mentioned in previous episodes. As well as the nature of being the And Asset, which is the policy loan can be used to acquire other assets. Make sure you join me on the next episode. We’ll see you then. Take care.

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About Patrick Donohoe

PatrickPatrick is the President and CEO and started Paradigm Life in 2007 after learning from his mentor Kim Butler about financial strategies outside of Wall Street. With a background in economics and marketing, Patrick immediately realized the opportunity to teach investors, business owners, professionals and families on a large scale using modern digital media and communication technology. Since 2007 Paradigm Life has worked with thousands of individuals in all 50 states. Patrick has shared the stage with financial experts such as Robert Kiyosaki, Peter Schiff, G Edward Griffin, Tom Hopkins, Blair Singer, and more. Patrick co-created the Cash Flow Wealth Summit ( with his friends Tom Wheelwright, CPA of Provision Wealth and Andy Tanner, the author of 401kaos and Stock market cash flow (have links to their websites and books). Patrick hosts The Wealth Standard Radio – a popular financial podcast every Wednesday morning at 9am MST on the Tune In Radio Network. The Wealth Standard Radio has been on the air since 2007. Patrick grew up in West Hartford, Connecticut and moved to Salt Lake City in 2003 to attend the University of Utah and graduated with a BA in Economics. His yearly highlights are a family trip to his parents home in Cape Cod, Massachusetts and to Hermosillo, Sonora Mexico where his wife Synthia’s family resides. He enjoys playing ice hockey and is an avid participant in CrossFit. Patrick currently resides in Salt Lake City, Utah, with his wife Synthia and their three children Hannah, Meghan and Jack.

A Wealth Maximization Account is the backbone of The Perpetual Wealth Strategy™