“Asset Protection Planning Isn't Expensive, Losing Your Assets in A Lawsuit Is.”
Asset protection is often a sub-set of business and estate planning. All estate plans should consider integrated asset protection planning and possible use of other jurisdictions to maintain custody of assets. It is the process of organizing one's assets and affairs in advance in order to guard against risks to which the assets may otherwise be subject to.
We work with an extensive group of international professionals all over the world that provide legal, tax and investment services. There are a few fundamental precepts:
- There Is No Magic Pill Or Plan
Asset protection simply means that you create barriers to your assets so onerous to the opposing party that you remove the financial incentive to pursue them. This can be as simple as placing your assets in a business entity, maintaining insurance, using the homestead exemptions, or hiding your money under the mattress. There are also sophisticated techniques using multiple entities and jurisdictions. The truth is, the more elaborate your planning the more difficult it is to penetrate your financial bunker.
- What You Don't Own Can't Be Taken From You
One of the Rockefeller's said: “Own Nothing, Control Everything” This principle is a bedrock to asset protection. It is this idea that prompted early English landowners to turn to trusts in order to preserve their holdings for their families after their death rather than have it revert back to the King.
- Use A Foreign Entity When Applicable
There are many good reasons why it is best to locate assets in a foreign entity, the hallmark is: NO country in the world automatically recognizes U.S. judgments. Protecting your assets is akin to combat, and the prevailing army usually has the opportunity to pick its battlefield. The United States is about the only country that allows lawyers to use a contingency arrangement to defer fees. Anyone who pursues your nest egg in a jurisdiction outside the United States will have to hire a local lawyer, pay up front, and post a bond with the court in the event the case is lost. Then in a civil matter in these jurisdictions the burden of proof is much more difficult than in the U.S. which is a preponderance of the evidence and other jurisdictions require beyond a reasonable doubt (akin to U.S. criminal burden of proof).
Don't Forget The Full Faith And Credit Clause
An obscure and frequently overlooked law connected with the U.S. Constitution REQUIRES every state to enforce every judgment made in another state. This is a simplification, and Constitutional scholars argue these points, but it does make probable that a judgment delivered in Maine can and will be enforced in California, and visa versa. This is another reason why domestic asset protection plans fall short when faced with ballistic financial attacks. A state can have an asset protection statute but that will not be able to preempt the U.S. Constitution which preserves the Full Faith & Credit Clause.
- Don't Wait Until Your World Implodes
You need to plan early and not wait until you are facing litigation or trying to overcome some other impending legal hurdle. As the saying goes, your asset protection plan should be “old and cold,” long in place, and not imposed hastily in the heat of battle. Planning ahead avoids any hint of fraudulent conveyance or transfer. Still, each state sets its own asset transfer standards, which are applied on the facts and circumstances of the individual case.
- Pigs Get Slaughtered
It is always wise to apportion the assets you want to protect. If you fail to do so, it can appear that you are trying to render yourself insolvent or have taken some other inappropriate action to frustrate potential creditors. The rule of thumb is to protect roughly a third of your assets while at the same time maintaining enough insurance to cover any perceived liabilities. The question would by why did you move all of your assets and yet the facts continue to show no interest in becoming an expat or citizen of another country; just will not sound reasonable.
- A Plan Should Not Change Your Life
A plan should not force you to change your life significantly or create a sense of stealth or avoidance. All plans should be legal, straightforward, and in full compliance with all tax liabilities. While Asset Protection cannot help you avoid income taxes in most circumstances, it can provide estate tax benefits.
- Don't Buy Into Everything You Read
The Internet is a wonderful tool, and we use it to communicate with current and would-be clients. But many so-called “asset protection” sites make false and illegal claims. Intelligent people seeking to protect their assets should be on guard whenever they hear or read any of the following claims:
- You can avoid taxes with your asset protection plan.
- Just use a Nevada Corporation.
- All you need is a foreign international business corporation (IBC).
- We have secret bank accounts. (thing of the past).
- All you need is a Swiss bank account.
- Get a foreign credit card to keep you transactions a secret.