Asset protection is about the defensive securing of assets. The focus is on averting a number of risks that can affect an asset. These include, in particular, taxes, such as property tax, gift tax and inheritance tax, and other taxes, such as the potential corona property tax. However, fees from credit institutions or other bodies in charge of asset management also influence this. In an idealized scenario, in which there is no reduction in wealth, a ten-fold increase in wealth is possible within three decades. Therefore, asset protection plays an enormous role in the further growth of assets. However, depending on the starting point, the possibilities for this are rather limited. Optionally, a move abroad, a diversification into mobile, internationally distributed assets, a family foundation in Liechtenstein or an international unit-linked life insurance can be considered.

We deal with asset protection in this article. Although it is a self-explanatory word, we emphasize that asset protection describes all legal measures that prevent an existing asset from losing its value. This short definition is necessary at this point because you often confuse asset protection with asset increase, but at least like to mix it up. As far as it serves the understanding of our readers, we want to strictly adhere to this distinction.

Of course, asset protection and asset growth go hand in hand. For this reason, the increase in wealth forms an essential, even outstanding side aspect in our contribution – both here in writing and indirectly in our everyday professional practice.

Since we are now dealing with asset protection, we should first consider what it should protect against. In fact, there are many risks that can reduce an already existing asset in its substance. On the one hand, we are dealing with taxes and other levies. This also includes the risk of legal change, which is usually due to political decisions, but sometimes also knows legal judgments as a causal cause. On the other hand, risks are often in the personal environment of the wealthy. This also includes entrepreneurial risk. However, risks can also exist in the asset itself or are directly related to it. For example, asset management causes costs that continuously reduce the assets to be managed. Thus, we are dealing with multiple, interdependent levels of risk.

The risks that threaten assets are in some ways questions to which a promising asset protection should offer optimal answers. As we will see, however, their number is very limited.

The first possibility we cite is the one that most readers probably come up with first, namely the departure abroad. However, the success of this asset protection measure depends heavily on the framework conditions.

Mobile assets that can be transferred internationally without major obstacles, i.e. money, precious metals, stocks and fund shares or assets invested in cryptocurrencies, to name just a few examples, make it easier to take your own assets with you when moving abroad. In this way, it is easy to escape the taxation of substance in a tax regime. However, it is important that you make a clear cut in relation to the residence. Because residency decides in most tax regimes whether a tax liability exists. In this respect, to give the opposite example, a US citizen is in principle always and everywhere taxable, if only on the basis of citizenship.

If, however, despite a clear farewell to Germany, you want to retain real estate in your old homeland, then you at least take a tax risk. This therefore applies to both real estate and company shares and co-entrepreneurships with a location or headquarters in Germany. In such cases, moving abroad therefore does not provide adequate asset protection. But even those who intend to start a company abroad with their assets should always pay attention to asset protection.

Protection of assets of a completely different kind represents the diversification of assets. Diversification of assets can counter several risks. Thus, diversification as asset protection can prevent the loss of value of certain valuables. This applies in particular to assets subject to a more volatile market value.

But also with regard to the taxation of assets, diversification can make sense. The aim is to diversify asset protection through international asset distribution. For example, if you want to keep real estate in your assets, but at the same time keep the risk of property taxation as low as possible, you can include real estate in your asset portfolio that is located in a tax regime that is unlikely to be subject to taxation in the medium or even long term.

Asset protection is also different. As paradoxical as it may sound, the key to this is abandonment. Yes, because he who has no property does not have to worry about his preservation. But wait, please continue reading at this point. We promise that what may at first sound completely absurd and abstruse will dissolve into satisfaction with the following explanation. Because the decoupling of the ownership of a property is the core of a foundation. A foundation is a corporation which consists of assets and uses them for the benefit of certain persons as well as for the fulfilment of other purposes. Both the initiative to endow the earmarked assets and the assets and disposition of the purposes go back solely to the wealthy founders. The owners themselves renounce their assets.

A family foundation is a possible form of design. In particular, it provides for financial support for the family members of the donor. Of course, this also applies across generations. A particularly advantageous design here are family foundations in Liechtenstein. A family foundation in Liechtenstein offers the advantage that it is hardly affected by taxes. A foundation in Germany, on the other hand, is subject to a periodic inheritance tax. In addition, Liechtenstein foundation law grants far-reaching statutory design possibilities. At the same time, Liechtenstein foundations are internationally recognized as corporations in wide circles. A link with trust law even extends this advantage and thus establishes compatibility with Anglo-Saxon legal norms.

The last way to build asset protection can be to take out insurance. In particular, a foreign unit-linked life insurance should be mentioned here. But at the latest at the time of disbursement to the heirs, there may be a reduction in assets by accruing an inheritance tax. However, if the heirs are resident abroad and there is no inheritance tax there, then this form of property protection can also achieve the desired success.

Finally, we will discuss the mutual effect of asset protection and asset growth. Because further asset growth is often the focus when it comes to asset protection.

So you can first consider how much added value a fortune of, for example, EUR 1,000,000 can create over the course of three decades. If an optimistic, constant return of about 8% is used and one assumes that no asset reduction takes place in this period, one calculates with interest and compound interest effect at the end of the term an asset of about EUR 10,000,000. However, if the current dividends are subject to a capital gains tax of approximately 25%, this only results in an increase of approximately EUR 5.500,000. In other words, when avoiding taxes, asset protection is quite capable of positively influencing asset growth – and significantly so. While we have omitted the discussion of the eventuality of inheritance tax at the end of the term, as well as all the other risks to which assets used to increase wealth could normally be exposed, this should only serve as a simple numerical example.

The bottom line, however, is clear: asset protection pays off when increasing assets and is therefore an aspect that should always be emphasized in this regard. However, despite the close integration of wealth protection and wealth growth with each other, many people interested in wealth growth, both the wealthy themselves and experts, treat wealth protection as a minor matter. That is why it is time for wealth protection to emerge from the shadow of wealth building.