ASSET PROTECTION

Asset protection planning is planning ahead of legal action to safeguard your assets from future creditors, divorce, lawsuits or judgments. This involves legal and lawful techniques that can deflect a lawsuit. It is a way to  provide you with settlement negotiation power.  It can can help prevent the seizure of your assets in the event of a judgment.

At the core of any asset protection plan is a professional and legal examination. Thus, an expert can assess one’s financial situation, assets, risks as well as personal or family goals.

There is a variety of legal techniques you can implement that provide a range of protective features. This can be from simple financial privacy all the way to judgment-proof asset protection such as an offshore trust. The planning is tailored to the assets, risk and comfort level of the individual or family seeking protection.

Wealth Protection: When to Act?

If you think (or know) that someone is going to sue you, do not wait any longer. Look into your options immediately. That is, the sooner you act the more favorable the outcome will be.

Asset protection planning is creating a complete financial plan taking one’s entire situation into perspective. The legal and financial vehicles used range from insurance policies, state homestead protection laws, business vehicles and  estate planning instruments. This often includes multiple legal jurisdictions. This means setting up entities in foreign countries where the laws are more favorable to the defendant or debtor.

These concepts are designed to deter a legal opponent from pursuing you. They should make it difficult or impossible, for someone to take your assets in a lawsuit if a judgment strikes. With proper planning an individual can protect his or her lifetime of accumulated wealth; including savings, real property, investments,  even future income.

When you establish a proper asset protection plan, a legal opponent or creditor recognizes that you are not an easy target. Little to no assets are within reach of a judgment. This puts the debtor in a powerful position. Markedly, this can deter a lawsuit, or in the event of a lawsuit or litigation, provide substantial negotiation leverage.

Financial Privacy

One of the first benefits of implementing simple legal vehicles to protect assets is privacy of ownership. You can own real property and other forms of wealth privately, therefore reducing your “visible” net worth. This can reduce the risk of frivolous lawsuits or a predatory legal situation.

When a contingent fee lawyer reviews a case, he will perform a public records search. He will look for available assets that he can liquidate to satisfy a judgment. No assets tied to an individual’s name drastically reduces the chances of a lawyer taking the case – lawsuit deterrence.

All of an individual’s or a family’s assets, investments, savings, property, business income and real estate can be owned privately through a variety of legal vehicles and business entities.

Lawsuit Avoidance

Lawsuits and litigation are expensive. They are financial vampires. When you protect your assets through a well-thought-out plan there is less to lose. This is the equivalent of taking your chips off the table when your stakes are high.

The only real winners in a lawsuit are the lawyers. Even if you win a lawsuit, you are still out your own legal expenses. They can even be substantially higher than the lawsuit, itself. Preventing a lawsuit is more important that winning a lawsuit. Asset protection planning is a key measure that can prevent you from being involved in a long, drawn-out legal battle.

Judgment Proofing

The final straw in any plan to protect assets is this. Did it prevent of the seizure of your assets? Achieving this may require powerful international legal tools, such as an offshore trust. This is because such action can separate your assets from the reach of the local courts. Thus, it places your assets out of reach of a creditor.

SEE OUR PODCAST ABOUT PROTECTING YOUR ASSETS   EPISODE 3

Asset protection planning can be very broad in scope. It starts small, such as carrying auto insurance. It can also include multiple legal tools and business entities using local and foreign jurisdictions. The choices depend on the protection needs, risk and comfort level of the individual.

The primary vehicles for estate and asset protection planning are as follows:

• trusts
• limited liability companies (LLCs)
• family limited partnerships
• foreign corporations and LLCs

Domestic Asset Protection Planning

There a few options that provide protection of one’s assets using legal vehicles and business entities in one’s home jurisdiction. The introduction of domestic asset protection trusts (DAPTs) is a relatively new thing in the U.S. Such legal entities can provide mid-level protection for property owners, physicians, small business owners and provide protection against internal liability.

Offshore Asset Protection Planning

The most effective asset protection plans involve a network of legal entities and structures offshore. Nevis and the Cook Islands are some of the safest and strongest offshore trust jurisdictions in the world. The best way to completely bullet-proof the protection of assets is to remove them from one’s home legal jurisdiction. These countries do not recognize foreign court orders. So, when you move your assets to a legal jurisdiction outside of your domicile you place them outside of the reach of legal predators. Paced in the proper vehicle, such as the offshore trust, this type of planning can offer the utmost in protection.

Foreign jurisdictions cater to investors seeking safe harbor. Many of them offer tools to shield wealth using legal statutes strongly favoring the debtor. Corporations, LLCs, trusts, banking as well as investment accounts are available that diversify and secure one’s financial holdings.

The most protective laws in the world, the most flexible legal systems and investor-friendly laws are in offshore jurisdictions with longstanding  case law histories of protecting personal assets.

Who Should Plan

Anyone with something to lose should at least consider protecting it. Most people are under the impression that asset protection planning is strictly for high net worth individuals. However the contrary is also true. The best illustration of this is to compare a judgment of $350,000 to a multi-millionaire and a family with a modest home, savings and income. In the case of the millionaire the judgment is a fraction of the total net worth. However in the case of a family, it could be almost all of it. So who should consider creating an asset protection plan? Both.

Taxation

Asset protection vehicles are usually entities whereby income tax responsibility passes through to the taxpayer. There may be tax-saving measures that you can implement. But commonly, protective planning is tax-neutral.

Personalized Planning

We offer a personalized approach to your planning. Therefore, we take our clients by the hand and guide them. Furthermore, we inform and educate you on available options so that you can make confident decisions throughout the process. This area of law is not one in which professionals need to get excessively creative. Understanding the laws and features of these legal instruments, we can create a plan using tools and combinations of legal vehicles. Accordingly, we use strategies that are proven to work in similar situations and that are backed by solid case law.

 Asset Protection FAQ

You and I work hard all our lives to accumulate wealth or build a legacy to leave to tour heirs. In an instant a lawsuit can wipe out all of that hard work. Someone files a lawsuit in America every 2 seconds. That’s 1 lawsuit for every 12 adults. So here we cover five legal tools to protect assets from lawsuits. 

Professional Risk

Before we discuss the legal tools we must realize that we at risk. Moreover, certain types of business owners or professionals are at a higher risk of lawsuits than others. Here are some of the at-risk professionals who should definitely consider an asset Protection Strategy (see below).

• Did you know that dentists face a disproportionate amount of lawsuits? It’s true, and according to the Bureau of Justice, 39 percent of lawsuits filed against dentists are successful. The average award is $53,000. But 21 percent of those awards are more than $250,000.
• Real Estate Agents. Lawsuits against Realtors continue to rise. The National Board of Realtors says that only 25 percent of those filed are successful. Nevertheless, they still must pay legal fees. When you consider the trend, it’s still important for Realtors to protect their assets.
• Medical doctors are also at risk of lawsuits as patients file medical malpractice suits at an alarming rate. And another report by the Bureau of Justice found that plaintiffs won those suits more than 50 percent of the time. The medium award was between $400,000 – $631,000. This depends on whether it was a jury or bench trial; the bench trials resulting in the higher awards.

Legal Tools to Protect Assets from Lawsuits

Knowing this, it only makes sense to protect your assets. You don’t want a lawsuit to shatter all your dreams for the future and wipe out the wealth you’ve built.

And luckily, with some strategic planning and an asset protection expert at your side, you can take some legal steps to protect your wealth. In fact, asset protection advisors in this company rely primarily on five legal tools to help clients do just that.

1. Land Trust

If you’re like many Americans, real estate is your biggest asset. But unless you live in one of the six states that forbid creditors from taking your personal residence, your house is at risk. No states protect investment real estate. So, your remaining real estate assets are at risk no matter where you live. If you want to keep your ownership private, you should learn about land trusts. These trusts are both for owners of a single home and real estate investors with many properties.

Land trusts act as a privacy shield rather than a tool to protect assets. So, the trust acts as a vehicle that holds title to your real property confidentially. It allows your or your LLC to be the beneficiary and to direct the property’s management. A land trust will help limit exposure to contingent fee attorneys. The reason is, when they do an asset search you look poorer than you really are. It may also help your heirs avoid probate, and provide you with the privacy that is helpful in lawsuit prevention.

It is prudent and smart to use the land trust in conjunction with an asset protection and lawsuit protection tool, such as an LLC. The LLC will be the beneficiary of the land trust for rental property. Thus, next we discuss the LLC.

2. LLC

The LLC, or limited liability company, is the most popular tool for holding real estate. Experts also recommend them as asset protection tools to hold stock market investment portfolios. Many use them to operate businesses.  The LLC has the asset protection benefits of limited partnership. When someone sues the owner, there are provisions in the law to keep a creditor from taking that member’s interest in the LLC. Plus, when an attorney sues a business, the LLC acts as a legal shield. It can keep the judgment from taking the member’s and manager’s personal assets.

In the past a one-member Limited Liability Company (LLC) was a great way to protect assets.  The law prohibited judgement creditors from seizing a member’s interest, whether it was a single member or multi-member LLC. But in 2010, the law began changing in states like California, New Mexico, Florida and others and it’s now possible for creditors to seize the membership interests unless it has two or more members. So, states such as Nevada, Wyoming and Delaware changed their statutes offering protection to single-member LLCs.

Savvy asset protection experts have changed the way they use this valuable tool in many states. Instead of simply placing the real estate investment or other risky asset into the LLC, it’s now smarter to place membership interests into a protective trust. Once you do this, an LLC is still one of the best vehicles for risky assets. For example, it is ideal for holding as real estate investment properties.

3. Corporation

In addition to LLC’s, corporations can help protect the owner’s assets. For example, an S Corporation or a C Corporation can offer great benefits as long as it meets certain conditions. If you’re considering using a corporation to shield your assets, keep these 3 issues in mind:

• A corporation is a great tool for protecting personal assets. It works as a limited liability tool for its shareholders, directors, and officers. That means it will protect your assets from collectors of corporate debts. It can shield against personal injury claims caused by the corporation or its employees. Likewise, it is a barrier to breach of contract judgements like those that many business owners experience.
• While a corporation is an excellent asset shield for many types of businesses, it won’t protect the assets of personal service providers. It cannot provide professional liability protection for as medical doctors, dentists, financial consultants, and accountants. This is even the case if they work for the corporation. It can, however, offer a shield from non-professional employee liability. Did a secretary hit someone when picking up your lunch? A corporation can help.
• In order for a corporation to truly protect assets, it must carry itself as a distinct and separate entity from its principals. If it doesn’t, a creditor can pierce the corporate veil, and attach judgements and liens to the principals.

4. Equity Stripping

If you have valuable assets, creditors will look to them in order to collect judgements or liens. There is one common asset protection strategy that enables you to continue utilizing those assets while making it difficult or impossible for creditors to access them. We call it “equity stripping,” and it does exactly what it sounds like. The idea behind the method is to strip your assets of any equity. Thus, there is little incentive for creditors to come after them.

We typically do this by attaching liens to the property that reduce the amount of equity. For example, if you own investment properties, you can take out a second mortgage or a HELOC that reduces the amount of equity in the property. This asset protection tool has many uses. We also use a similar lien structure for things like accounts receivable and valuable office equipment. Alternatively, you can set up a privately-owned LLC that records mortgages or deeds of trust against all of your real estate. Then when the “bad thing” happens, there are international institutions who will acquire the loans and distribute the cash. One then places the resultant cash into the next legal tool, the offshore asset protection trust.

5. Offshore Trust

Finally, an offshore asset protection trust is another tool under the belt of asset protection experts. These trusts operate in much the same way as US trusts, but the trustee is not a US citizen. In fact, for these trusts to stand up in court, the trustee should not be a resident of the US. Thus he will not be obligated to follow US court orders. With a US trust, the US trustee would have to hand over the control of the trust to the courts if so ordered.

The offshore trustee, on the other hand, is not subject to the court order and would be willing to fight to protect the assets. Obviously, this type of asset protection tool is best set up by an expert with the knowledge and experience to do it right. It is ideal to establish one before someone sues you. We have, however, seen work repeatedly after a lawsuit is filed.

This organization has established hundreds of offshore asset protection trusts and have not seen clients lose assets when established properly. So, there is one big reason why they are used frequently – they work.

Asset Protection Conclusion

Asset protection is an integral part of keeping your assets safe from creditors, but it’s important that whatever method you use is structured correctly. And considering that the cost of litigation in a lawsuit can reach $150,000 according to the Small Business Administration (SBA), you should do all you can to protect your business, assets, and the wealth that you’ve worked so hard to build. There are legal tools that were created to do just that. The bottom line is that knowing this information alone will not help. You actually need to contact an expert an establish the legal tools.  There are numbers and a form on this page in order to get additional support or to take the needed action.  

The best asset protection strategies involve legal tools and financial plans developed to shield valuables from lawsuits. These includes analyzing a list of assets that need protection and determining which legal instrument or strategy would ideally protect each one. Examples include forming certain types of trusts and companies and taking advantage of regional laws designed to protect assets. It can aid in achieving financial goals, estate planning for the next generation, as well as facing the reality that we are all vulnerable to litigation. Though pre-planning is best, there are even ways to protect yourself after a LAWSUIT IS FILED.

TOP Best Asset Protection Strategies

Here is a list of common legal strategies for shielding assets from lawsuits.

1. Use LLCs
   Asset protection strategy number one is to use limited liability companies. LLC statutes include provisions that keep a creditor from taking the company or the assets inside. The exclusive remedy in most jurisdictions is a charging order. The charging order says that the creditor has the right to distributions paid out of the LLC. But the creditor cannot force you to make such payments. Whoever has the right to the distributions is responsible for the taxes whether they are paid out or not. That means you stick your creditor with a tax bill instead of an asset. Wyoming, Nevada and Delaware have most protective domestic statues. Stronger yet is Caribbean island of Nevis, which possesses potent laws to shield company holdings.
2. Asset Protection Trusts  
   This is considered the most powerful tool to protect money from lawsuits. The best asset protection trusts are formed offshore. How does it work? Local courts do not have jurisdiction over foreign trustees. It ties the hands of the courts and the opponent’s attorney. There are domestic options but the strongest legal statutes are in the Cook Islands and Nevis. The offshore trust is one of the few asset protection strategies that work after a lawsuit is filed. This strategy works best for liquid assets
3. Own Nothing Personally
   There are legal tools that keep creditors for seizing what is yours. When you get sued personally, most assets in your name are vulnerable. We are not saying not to own anything. We are saying do not hold non-exempt assets in your own name. Why? Because the first thing a contingent fee attorney does when thinking about suing you is to do an asset search. Own a car? Why not own it in a title holding trust to keep your name out of the public records? Own or might own rental property? Why not hold it in a land trust for privacy of ownership? Then you can hold the land trust in an LLC for lawsuit protection and asset protection. Have a sizable savings / investment account? Hold it in your own name? If so, to the opposing attorney getting at your assets is like shooting geese in a pond. When you hold it in a proper asset protection trust, you have access but your opponent does not. Moreover, when you pass away, your trust names your heirs as trust beneficiaries. The bottom line? Since there are legal tools help you keep what is yours, why not use them?
4. Use Separate Legal Tools
   Experts agree you should not own investment real estate in your own name. When someone sues you, you could potentially lose all of it. Holding real estate in an LLC is a good idea. But what if there is a tragic accident that surpasses your insurance coverage? This is very common. Why not own each piece of real estate in a separate LLC? That way, you cubby-hole your liability. Thus, a lawsuit against one of your rental properties does not domino into losing all of them.
5. Don’t Flaunt Your Wealth 
   It’s much better to be rich than to look rich. It may feel good to have your neighbors know you are doing well. But ostentatious displays of wealth breed more jealousy than admiration. Flashing your cash and you might as well wear a big neon “Sue Me” sign around your neck. Lawyers need to take food off of your table in order to put it on theirs. And, trust us, they have as much sympathy as hungry pack of lions. There are no feelings. You’re just their next meal.

Your Profession

Your profession also determines your level of risk as well as which strategies that you need to employ to protect your assets. If you are a physician, are in the real estate industry your needs are likely greater than a typical desk employee. Speaking of employees, no matter what profession you are in, if you have employees you have liability. We have spoken with business people who have been falsely accused, of discrimination, sexual harassment and wrongful termination. Others have experienced tragedies where an employee had injured another as a result of a car accident or equipment mishap.

Divorce

If your love is on the rocks, an expensive divorce  could cost you a tremendous amount in legal fees in addition to the division of assets. There are ways to protect yourself from such a life-disrupting scenario.

Hiding Assets

Can you hide assets? There are some ways you can make it very difficult for all but the most determined creditor to find out what you have. The important thing to know, though, is hiding is one thing. Protecting is another. A thorough deposition can uncover most hidden assets. So, there are ways to hide assets. But if you protect them, even if someone finds them, they remain safe and secure for your future use.

What You Protect

What do you have to protect? Do you have liquid assets? A personal residence? Investment real estate? Automobiles? What you have to protect will determine which legal tools you need to use and whether domestic or offshore  protection is what you need. Where you live will also make a difference. Florida has 100% homestead protection for primary residences. New Jersey has zero. California residences tend to have more value than houses in many other parts of the country. The amount homestead exemption in that state, however, does not sufficiently reflect the elevated values for many people.

Asset Protection Attorney

The topic of asset protection is generally not a focus of instruction in law schools. The reason is that it is counter to the profession. The more educated people are on the securing of wealth the less lucrative it is to the legal profession. That is why many attorneys are not schooled on the topic. We have established legal tools for attorneys and their clients for several decades. Are you an attorney or simply a person who needs to take protective measures for yourself? There are knowledgeable consultants who can discuss your needs. There are numbers and an inquiry form on this page for that purpose.

Customized Plan

Customizing an asset protection strategy is done when you establish specific legal tools to hold specific assets. Each legal vehicle represents state, federal or foreign laws that limit one’s liability or protect personal assets from specific risk.  A strategy is created based on the risks of the individual seeking protection.

Take Action

Knowing the best asset protection strategies to secure your assets, alone, won’t help. You actually need to set up the proper legal tools and use them if you want financial security for the legal predators out there. So, make the call. Educate yourself. Then take action on the asset protection strategies that are right for you. You can use the telephone numbers or inquiry form on this website to get more information.