Asset Protection Planning
Asset protection planning is proactive legal action that protects your assets from future creditors, divorce, lawsuits or judgments. This involves a series legal and lawful techniques that can deter a lawsuit, provide settlement negotiation power and help prevent the seizure of your assets in the event of a judgment.
At the core of any asset protection plan is the professional and legal examination of one’s financial situation, assets, risks as well as personal or family goals.
There is a variety of legal techniques available that can be implemented that provide a range of protective features, from simple financial privacy all the way to judgment-proof asset protection – the planning should be tailored to the assets, risk and comfort level of the individual or family seeking protection.
For the most benefit, planning should take place before the need arises, however there are options that can create a much more favorable position after a legal cause of action. Asset protection should be considered a grand form of financial insurance and be implemented well in advance of the need for it. Plans are much more effective for debtors who have the foresight to set them up in before a lawsuit.
If you think (or know) you are going to be sued, do not wait any longer, look into your options immediately. 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. In more involved cases this often includes multiple legal jurisdictions, including 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 and make it complicated, if not impossible, for your assets to be taken in a lawsuit if a judgment results. With proper planning an individual’s lifetime accumulated wealth, savings, real property, investments, even future income can be protected.
When a proper plan has been established any legal opponent or creditor will have to recognize that there is no easy target – little or no assets are within reach of a judgment. This puts the debtor in a powerful position and this itself can deter a lawsuit, or in the event of a lawsuit or litigation provide substantial negotiation leverage.
One of the first benefits of implementing simple legal vehicles to protect assets is privacy of ownership. Real property and other forms of wealth can be owned privately therefore reducing your “visible” net worth which can reduce the risk of frivolous lawsuits or a predatory legal situation.
When a contingent fee lawyer reviews a case, s/he will perform a public records search looking for assets available that can be liquidated to satisfy a judgment. In the event that there are no assets tied to an individual’s name, the chances of a lawyer taking the case on is reduced drastically – 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.
Lawsuits and litigation are expensive and can become a financial vampire. When your assets are protected through a well thought out plan there’s less to lose. This is the equivalent of taking your chips off the table when your stakes are high.
The only winners in a lawsuit are the lawyers. Even if you are involved in a lawsuit and win, you are still out your own legal expenses which can be very high. 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 drawn out legal battle.
The final straw in any case of asset protection is the prevention of the seizure of your assets by a court through a lawsuit resulting in a judgment. This level of planning is more involved and may involve powerful international legal tools. This action can separate your assets from the reach of the local courts, thus placing your assets out of reach of a creditor.
Types of Planning
Asset protection planning can be very broad in scope and it starts small, such as carrying auto insurance. Or it can include multiple legal vehicles and business entities using local and foreign jurisdictions depending on the protection needs, risk and comfort level of the individual.
The primary vehicles for estate and asset protection planning are trusts, limited liability companies, family limited partnerships as well as corporations and LLCs, both foreign and domestic.
Domestic Asset Protection Planning
There are very strong options that provide substantial 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. with growing popularity. Such legal entities can provide substantial protection for property owners, physicians, small business owners and provide protection against internal liability.
Offshore Asset Protection Planning
The strongest asset protection plans involve a network of legal entities and structures in the safest and strongest jurisdictions in the world. The only way to completely bullet-proof the protection of assets is to remove them from one’s home legal jurisdiction. When your assets are transferred to a legal jurisdiction outside of an individual’s domicile, foreign court orders are not recognized therefore creating a near impossible legal hurdle to pursue them. This type of planning offers the most protection one can implement.
Foreign jurisdictions cater to investors seeking safe harbor for their wealth through legal statutes strongly favoring the debtor. Corporations, LLCs, trusts, banking as well as investment accounts are available that diversify and protect 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 judgement 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. So who should consider creating an asset protection plan? Both.
Asset protection vehicles are usually tax-neutral entities whereby income tax responsibility passes through to the taxpayer. There may be tax-saving measures that can be implemented but most protective planning does not increase or decrease taxes.
Asset Protection Planners, Inc offers a personalized approach to your planning. We take our clients by the hand and guide them, informing and educating on all of the available options so that confident decisions are made 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, a plan can be created using tools and combinations of legal vehicles that are proven to work in similar situations backed by case law.