Asset Protection Planning 101 (continued)
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Asset Protection Trust Requirements
A key element of asset protection 101 is to know the requirements. For the trust to protects your assets, here is a list of some of the requirements:
- You must make sure that when you form the trust, you make it irrevocable. With an offshore trust, you can actually make changes to the trust with the trustee’s assistance.
- You have to appoint an independent trustee. This independent trustee must be either an individual with residency in the same jurisdiction as the trust. This is usually a licensed trustee, in some cases, a bank.
- The trust must include a rule that allows distributions to occur only when the trustee agrees to them. (There are also safety-valve provisions for you to change trustee if your trustee does not cooperate.)
- The trust must also include a spendthrift clause. A spendthrift clause is wording in a trust document. It prevents creditors from attaching the trust assets before the trust distributes them to the beneficiary.
- With a domestic trust, depending on the state, you need to place either part or all of the trust’s assets in that state.
- With an offshore trust in the Cook Islands, Nevis and Belize, you can locate the trust’s liquid assets anywhere. That being said, it is sound advice to locate the asset abroad. Not in a jurisdiction such as the US, or an offshore bank with US branches. If they were the assets may be seized, regardless of whether or not they are in the trust.
- The trust’s administration needs to be located in the jurisdiction where the trust is created. The same goes for the location of required documents.
Keep this in mind if wish to pursue an asset protection trust. Seek assistance from an asset protection specialist when forming your trust. Doing this greatly enhances the likelihood that the trust gets established properly. There are simply too many variables that could expose your assets to lawsuits. After all, this is your money. If you do not establish trusts for a living and keep up on the day-to-day changes, you would be putting your assets at great risk. Don’t rely on an amateur. Spend what it takes to have it done right. There is a number or inquiry form on this page for more information.
2. Accounts-Receivable Financing
Borrow against your accounts receivable. There are financing companies that will so so. This may help make your receivables much less tempting for creditors. So, using your business receivables, and borrow against them. Once you do this, you can then move the cash to an offshore asset protection trust. Doing this can keep it out of harm’s way. By moving your wealth from easy-to-get to hard-to-get, you make yourself quite unattractive to creditors.
3. Equity Stripping
Much like accounts-receivable financing, equity stripping requires you to take out a loan against the asset. You then transfer the money received from the loan into a legal tool that protects your assets. You’re stripping the equity out of certain assets, such as real estate and equipment. Then you’re transferring them into asset protection tool, such as an offshore trust. By doing so, you make your equity much less interesting to creditors. Equity stripping decreases the value of the assets moves the loan proceeds into a financial fortress. This maneuver makes it much more difficult for creditors to take what is yours.
4. Family Limited Partnerships
A family limited partnership (FLP) offer an excellent asset protection opportunity. When you form an FLP, you usually move assets into it and trade it for an interest in the partnership. Once you move assets into the FLP, the Uniform Limited Partnership Act helps to shield those assets from creditors. Furthermore, the owner of the FLP can maintain the FLP itself as well as the assets. As far as your limited partner shares go, there is no significant market value for them. Therefore, your share value, for accounting and tax purposes, may be worth much less than what the originally transferred asset was worth, possibly saving you money in taxes. (Talk with a knowledgeable, licensed tax advisor.)
Asset Protection Planning 101 Tips
Asset protection tools aren’t limited to legal entities, trusts and other popular protection vehicles. An asset protection tool can be as common as auto and homeowners insurance, for example. You probably already have some form of protection the cover small vulnerabilities. Driving is probably one of the most dangerous things you can do, so how could you start protecting your assets at the source vulnerability? Insure yourself, but keep in mind, no matter how big your policy limits, someone can always sue you for more. That is why a proper asset protection plan is so essential.
Before your assets are at risk from a legal opponent, implement everything you can do that will create a barrier between your assets and a legal predator. Purchase and lease vehicles under an LLC name and if you’re an entrepreneur, write off the expense. Don’t title your vehicle to your business, that is extremely hazardous and exposes your business revenue and its assets to the legal system. Your business can lease the automobiles from the LLC. Just with this one type of asset protection — proper ownership, you can protect yourself from personal liability in a business-related accident.
Doing it Right
There are some things you need to be aware of and know about, some types of (so called) “asset protection” will actually land you in criminal court, put all of your assets at risk or both. This is how you can spot an asset protection scam or a tool that will get you in some hot legal water.
What Not to Do
- Tax Savings – Anything that says that your asset protection plan will save you money on taxes could be a one-way ticket to trouble. Protecting your assets and your tax liability are not necessarily related. U.S. Citizens are responsible for taxes on a worldwide income basis. Your money can be held anywhere, but you owe taxes on your income, regardless of where it comes from. Do your research if anyone advise you that an asset protection plan, tool or strategy is a “tax free” initiative or will “save you money on taxes”. To name a few asset protection scams, Common Law Trusts, Constitutional Trusts, Deceptive tax plans, Nevada Trusts, Massachusetts Business Trusts or anything with an agenda that has to do with your taxes.
- Hiding Money – How about we just put our liquid assets into a private, numbered or secret account in a banking jurisdiction and call that asset protection? Anything deceptive in nature is not a good idea, you do not have to lie, hide, scam or cheat a system to have a strong asset protection plan and legal strategy that is bulletproof.
- Give It To Your Mother – How bout you just sign everything over to someone else. Then you don’t have to worry about someone getting your assets if a plaintiff defeats you in a court of law? Not a good idea, you still have your assets unprotected and within reach of the legal system and its players.
Where Lawsuits Come From
- Occupation – We specialize in highly sued professionals  and business owners offering planing and strategies that shield your personal assets from the liability hazards of your profession or type of business.
- Property – Tactics and planning that protect you from internal liability of property ownership and real estate investments as well as property protection from external liability are common for many of our clients.
- Divorce – With proactive planning you can set aside your business income and personal assets from a marital property battle.
- Employees – We plan and protect you from frivolous lawsuits and civil litigation from disgruntled or terminated employees.
Total Asset Protection
There is only one type of asset protection tool that has held its own through the years and that’s the Cook Island Asset Protection Trust. This is how you take all of your assets and simply remove them from the U.S. legal system and put them into a legal system that discourages frivolous lawsuits and makes a very expensive, time consuming and near impossible arena for a legal predator to prey. This website will walk through this in more detail as we cover the rest of the subjects.