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For some, putting an Asset Protection
Plan in place is advisable in order to attempt to remove the economic incentive to
be sued and also to try and increase the ability to force an early settlement in the
event a suit is filed.
In order to assess whether a client needs to develop a comprehensive Asset Protection
Plan,
we must first determine the client’s sources of liability. Some potential sources
include:
- Divorce
- Auto Liability
- Liability from owning Real Property
- Negligence
- Liability from Agents, Employees and Children
- Professional Malpractice Liability
- Contractual Liability
- Liability as an Officer or Director.
We work with each client and their financial advisors to evaluate their need for asset
protection and then develop an Asset Protection Plan that works to legally secure their
assets and minimizes taxes and transfer penalties.
Our attorneys are able to employ a variety of techniques including Limited Liability
Companies, Irrevocable Trusts, Protected Retirement Plans, Domestic Asset Protection
Trust, State and Federal Exemptions among others when planning for asset protection.
- Goal of Asset Protection Planning
The goal of asset protection planning is to change a creditor's economic analysis. In order to properly understand asset protection, one must analyze timing, the creditor, and the specific assets under consideration.
- Not About Hiding Assets
Asset protection is not about hiding assets. It doesn't work. Private investigators may find the assets. They will be found out in a debtor examination. Perjuring oneself is not a viable option.
- Concepts
The first concept of asset protection is that creditors can only go after assets that you actually own. The strategy is to remove title of the asset from the client's name but still allow them to have control and enjoyment of those assets. The way we do this is through limited liability companies and through trusts. With respect to certain limited liability companies, there is no remedy to attach a membership interest. In certain states, the only thing a creditor can obtain is a charging order. The creditor cannot force a distribution. Thus, it makes it difficult for the creditor to get to the asset. This makes settlement much more favorable to the debtor.
The second concept is certain assets are exempt depending on the State. For example, Texas, Kansas, Florida, and Nevada have desirable homestead protection. In other States, like Florida, annuities and life insurance are protected by statute and court decision.
The third concept is to make assets less desirable. An example of this would be placing liens on real estate. For example, one could create a home equity line of credit from a family member and secure it with a deed of trust.
- Better to do Something
It is generally better to do something rather than do nothing. If you do nothing it is almost certain that you will lose the asset. If you do something, you have a much better chance of keeping all or part of the assets.
- Fraudulent Transfers
One must carefully consider whether a court will view a transfer as a fraudulent conveyance to defraud creditors.
- Estate Planning and Financial Planning
Asset protection is frequently and best done as part of and in the context of an overall estate plan and financial plan.
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