Asset protection starts from the very simple concept of obtaining insurance and spans to the use of complex legal techniques described throughout these blog entries. When properly done, asset protection planning is the implementation of special business and/or estate planning techniques in advance of any potential threat, the goal of which is to place assets out of the reach future potential creditors.
Legitimate asset protection planning does not involve hiding assets and is not a way to avoid taxation. Anyone or any entity claiming to do so should be avoided at all costs! The most important aspect is to have your plan in place BEFORE any threat. If transfers are made after a threat to your asset appears (i.e., a lawsuit), then that transfer may be considered a fraudulent transfer and the assets will not be safe from attack.
Have you ever found yourself wondering; “How can I protect myself, my business, or my assets from a lawsuit?” There are many ways to protect yourself, your business, and your assets from a lawsuit or from the results of litigation. Proper asset protection planning can be essential in the protection of your assets from potential litigants and creditors. When set up properly, an individual, partnership, LLC, or corporation can operate with confidence and flexibility.
Contact us for your free consultation. Rooney & Rooney, P.A.
WHAT IS MY MOST SIGNIFICANT FINANCIAL RISK AS AN INDIVIDUAL OR BUSINESSES?
Hi Pete, In one sense or another, no matter the “actual” risk is, the end result is likely to be “Litigation”. Litigation is the process of taking a case through our court system. The litigation or legal process is most commonly initiated through what we call a civil lawsuit. In this process, there is a plaintiff, who initiates the lawsuit, and a defendant which is against whom the lawsuit is brought. Find out how to protect you and your assets from a lawsuit by reading more or schedule a time to come in and meet with one of the attorneys at Rooney & Roonet, P.A.
I have heard the term off-shore trust used in relation to asset protection. What does that mean and is that something I should look in to?
The term “offshore trust” is simply a conventional trust formed under the laws of a jurisdiction outside of the United States. Offshore trusts are usually similar to regular trusts in that they involve a “settlor”, “trustee”, and “beneficiary”. A settlor generally established a trust and “settles” his/her or its assets in the trust. The trustee(s) then manage the trust and assets as defined in the rules of the trust documents for the benefit of one or more people or group of people referred to as “beneficiaries”. Offshore trusts are generally tools used in conjunction with other asset protection planning tools. Some offshore jurisdictions have laws that make them more attractive when setting up and using an offshore trust to protect assets or discourage someone from attacking the assets through their particular legal system such as a lawsuit.
You are more than welcome to come by our office to discuss this further. Give us a call at 772 778 5400 and ask for Jessica so she can schedule you a time to meet with me.
Over the holidays,. a friend of mine asked me the following question and because it is so relevant to this discussion, I decided to post it.
IF I PURCHASE LIABILITY INSURANCE COVERAGE DO I STILL NEED ASSET PROTECTION?
The quick answer is yes. While insurance is clearly one of the basic and fundamental tools used to protect you and your assets, it is rarely enough in and of itself. It may not cover the specific risk for which you are the target of a lawsuit. I just recently was consulted by a local business in the field of computer and internet marketing. He came to me after being named in lawsuit and being denied coverage by his insurance carrier. After reading the policy, hidden in the policy was an exclusion for the act which was alleged in the lawsuit. As a result, not only was their no coverage, but he had to pay for his own attorney in defending the lawsuit. Of course, insurance will not cover you for alleged punitive damages or intentional wrongdoing. Also, it is not unheard of for an insurance company to go out of business leaving you with no available coverage. Finally, it is also possible that a judgment against you will exceed your policy coverage. These are just a few examples of why asset protection should be analyzed by a professional and you should not just rely upon a policy of insurance.
So how do I know if I have enough asset to even need asset protection?
Today’s economy has certainly changed the answer to this question and we expect that the next few years will change the answer even more.
Once upon a time, asset protection planning was reserved only to high-net worth individuals. That time is no more. Whether you or your business should engage in asset protection is on a case-by-case analysis. You may not have the current need for an overly complex asset protection plan, but everyone should have some protection in place. Of course, all high-net worth individuals should have an asset protection plan in place. Certain activities or professions increase the need for asset protection planning. Professions such as doctors, lawyers, real estate developers, financial advisors, etc. should certainly have their specific situation assessed by an asset protection lawyer. If you own investment/rental real estate, operate a business, have children (particularly of driving age), or are a guarantor of loans, then you should have your situation assessed by an asset protection attorney. If you believe that at any time in the future, you or a family member, or your business or a business partner may be the target of a lawsuit, then you should consider asset protection planning. Feel free to call our office at 772 778 5400 to schedule a time a to meet with me to discuss your situation in greater detail.
Cool blog!
I have come across some new questions asked during consultations which I thought I would share with our blog readers.
IF ALL MY ASSETS ARE IN MY BUSINESS, WHAT CAN I DO TO PROTECT THEM?
When a business entity (corporation, LLC, etc.) holds significant assets, it should be assessed by an asset protection lawyer as to the need for asset protection planning for the business as opposed to the owner. While the asset protection planning techniques are similar, there are important and distinct differences. Making a minor mistake could lead to the assets being exposed to potential creditors.
DOES A LIVING TRUST PROTECT MY ASSETS?
NO. Typically, the “living trust” is a very useful tool used in estate planning. When properly structured, it can avoid the probate process for the assets transferred to it, but it is not a tool that offers protection from your creditors. If you are sued and a judgment is obtained against you, a court can order you to revoke the trust and pay the creditor.
HOW DO LAWYERS DECIDE WHETHER OR NOT TO SUE SOMEONE?
There are really two main parts of the equation as to how a lawyer decides to sue someone. The first, of course, is whether the case has merit or a legal ground for recovery. The second, is the business aspect of how the lawyer will get paid. If the lawyer is retained by his client and paid by them on an hourly basis, then he is likely to take the case. If the case is going to be taken on a contingency basis (i.e., no recovery no fee), then the lawyer has to determine if the target of the lawsuit is collectable (i.e. has assets worth going after). A good asset protection plan reduces or eliminates the ability of a creditor to collect a judgment from you. The result may be the lawsuit is never filed.
CAN I MAKE GIFTS TO MY SPOUSE OR FAMILY/CHILDREN?
You are free to make gifts to anyone. However, if you legitimately give it away, you can no longer enjoy control over your asset. If you just pretend to give it away, then it is reachable by creditors. If you give it to someone other than your spouse, you may lose the income from the property and possibly incur gift tax consequences. Of course, it will also be exposed to the creditors or potential lawsuits against the person you gifted it to! Finally, if you try to make the gift when a creditor is on the horizon, it may be considered a fraudulent transfer which the court can set aside. All in all, too many drawbacks to think that gifting it away will solve your problems.