Asset Protection for Liquid Assets
Liquid assets include cash and those assets that you can readily convert into cash. It is easier for us to securely tuck away liquid assets for our clients than real estate. This is because it is easily transferrable. The tools that we use to protect liquid assets (discussed below) depends on its value, the risk and the client’s goals. We usually secure the assets in the legal tools with precisely drafted documents, including LLCs and asset protection trusts. In turn, we help clients establish bank and/or brokerage accounts for these entities. The client, subsequently, transfers the assets into them. The legal structures, set up properly in the right jurisdictions, provide safe havens from lawsuits, judgments and creditors.
One must determine how accessible their cash needs to be. For example, retirement accounts lock up funds until a certain age. Insurance vehicles are typically expensive. Insurance companies build them to boost their own profits, not that of the policyholder. So, that is why we often use LLCs and asset protection trusts. These vehicles typically allow for easy access to the liquid assets. Plus there are provisions in the law that keep legal predators out of these types of structures.
To protect money and maintain ready access to funds, we typically establish legal structures such as LLCs, trusts and combinations thereof.
Asset Protection Trust + LLC
Asset protection trusts (a.k.a. self-settled spendthrift trusts) can work extremely well to protect liquid assets. The asset protection trust is one of the strongest devices available to keep wealth away from judgment creditors. The most powerful of all of these is the offshore asset protection trust. These are special legal tools designed specifically to protect the assets of individuals, families and organizations. One reason why they work so well is that the trustee is not subject to the court orders of your friendly neighborhood judge. And a reason our clients like them is that they work. Moreover, the trustees we utilize are licensed, bonded and time-tested.
You can enhance this strategy by placing a business entity inside the trust to act as a remote control, so to speak. An LLC inserted inside of the trust holds the bank accounts. It affords a trust settlor (you) day-to-day control over the assets. Then, with a simple phone call or email, the trustee can step in to give you maximum protection when you need it.
Here is How it Works
Protected funds are deposited in a secure account in the name of an LLC. The asset protection trust owns the company. This strategy offers a balance of asset protection and control. As indicated above, during times of legal duress, the trustee can step in as manager of the LLC.
Again, the most effective self-settled spendthrift trusts are located offshore. The reason is that the trustees reside abroad, and are not subject to your local court orders. Plus, the you can house trust funds in a strong, safe offshore bank where local courts cannot issue freezing orders on the account.
The trust provides benefit to trust beneficiaries according to the terms of the trust deed. Again, the trust owns an LLC and the LLC holds the bank account. When times are good, the trust settlor manages the LLC and controls the over the bank account. In times of legal duress the trustee can step to protect you. If you stayed as manager a judge could order you to turn the funds over to your enemies-at-law. When the trustee steps in, however, that turns the tables against your legal opponent. So, that is why the trustee steps in as company manager – to protect the funds from local court orders. That is, your local judge cannot compel the trustee to distribute assets outside the trust deed dictates. The assets in the trust are set aside for the benefit of trust beneficiaries. Furthermore, the laws of the trust jurisdiction were crafted with the intent of keeping judgment creditors from seizing trust funds.
Is Offshore Banking Safe?
Sometimes clients ask us if holding funds internationally is safe. Think about this. The United States has 4.4% of the world’s population, 80% of the attorneys and 96% of the world’s lawsuits. So, let’s turn the question around. Does that sound safe?
Global Finance publishes an annual list of the world’s safest banks. On the list of 50 banks, guess how many US banks show up. Three. Yes, only 3. All are on the bottom half of the list. In other words, there are much safer banks offshore than onshore.
“Yes, but in the US, we have the FDIC, and the full faith and credit of the US government.” Okay, let’s think about this. So, the most in-debt country on the planet insures the banks? Again, this the same country that recently had its credit rating lowered by Standard and Poors.
The bottom line? There are much safer places to protect your money than the United States. This is both from a legal and financial security vantagepoint.
Liquid Assets Protection Conclusion
To protect liquid assets, seek an experienced professional group, such as this organization, to establish the proper legal tools applicable to your needs. With properly structured asset protection tools, you can have the financial security and peace of mind knowing that your hard-earned cash is safe and secure.
Implementing this strategy includes coming up with the proper asset protection provisions that meet your particular needs. This includes a precisely worded trusts, properly crafted and filed legal entity documents. If an LLC is used, that includes the appropriate LLC operating agreement. All of these must be worded and maintained properly in order to stand up in court.
You may be able to gain some protection using domestic entities. But if you live in the USA, most of the lawmakers are also licensed attorneys. As such, they routinely draft laws to the benefit of their own profession. As a defendant of means, the deck is stacked against you. A domestic judge can seize domestic assets. Those housed abroad in legal tools designed to fend of predators act as your legal fortress. Local laws are drafted by those in the legal profession in order to make the job of transferring your assets from you to themselves do not apply.