.....Own Nothing…But, Control Everything. ~John D. Rockefeller
We live in a sue happy, litigious era. How do you protect your assets? The key is to plan ahead, BEFORE creditors loom. For many years, I have designed and implemented various plans to preserve client assets from future creditors. This involves specially-designed trusts, partnerships, LLC's, Corporations, and other tools.
Our Asset Protection Planning Experience
Steve Yahnian has been advising clients on sophisticated asset protection, tax, estate, business and real property law matters since 1980.
We specialize in the complex and sophisticated. We are often called upon to defend or plan for what others may say is impossible with:
- Proactive tax planning.
- Aggressive tax defense.
- Creative asset protection.
- Family-oriented estate planning.
- Common sense business, real property and corporate planning.
The subject of Asset Protection planning and our approach are both discussed in the following sections of this web site.
Return to top
Why Asset Protection Planning?
The idea of safeguarding assets from the many risks to which assets are subject is certainly not a new concept. For Americans and, increasingly, for persons in other countries, this is the case particularly when trying to protect against the potential of a future legal liability. The importance of this question and the reasons for asking can more easily be illustrated through the following Example.
Example: John was a physician in California. He was a professional who was thorough and ethical in his work. He was also extremely hard working and successful. By the time He was in his early forties, he was earning a high salary and had managed to accumulate a sizable net worth.
John was as diligent with his personal affairs as he was with his patient's needs. His and his wife's estate was as well planned as it could be (or so they thought). They had pour-over wills, revocable living trusts, durable powers of attorney, living wills, a recently funded irrevocable insurance trust, a trust for each of their three children, burial instructions, and a charitable remainder unitrust.
John's financial plan was also finely tuned with net after-tax returns for the previous several years reaching well beyond the upper reaches of expected norms. Unfortunately, as well planned as John's estate was, one very important form of planning soon became quite conspicuous by its absence--asset protection planning.
The first of a series of lawsuits was served upon John for medical malpractice. The next two suits involved allegedly negligent operation of rental properties where tenants were injured or the victim of crime. Several other suits followed as well in excess of liability insurance. After failing to have two adverse judgments reversed on appeal and following the tremendous drains on his cash flow and other resources due to the strains and expenses of "fighting the battles," John sought federal bankruptcy protection.
Lesson: Had John taken an integrated estate planning approach to his overall planning, the ultimate outcome of his misfortunes would likely have been much more favorable. It certainly would not have been any worse.
A number of factors evolved in the 1980s and into the 1990s, however, that make persons with wealth not only more aware of the need to engage in some form of protective planning but which in fact leave those who fail to plan more exposed than ever before.
Expanding Theories of Liability
By definition, a system whose legal decisions are based on legal precedent will be subject to expansion of its theories of liability. Each decision in the chain will set the stage for the next step of expansion. This, coupled with the apparent and increasing willingness of judges and juries to expand a theory of liability, leaves a tremendous amount of uncertainty and exposure for the person who has relied on traditional forms of planning.
Years ago, the idea that a smoker who developed lung disease would sue a tobacco company seemed ludicrous, but today we have become familiar with this commonplace theory of legal liability. Is it possible that in the future we will become familiar with a situation in which people who ate meat and dairy products will develop heart disease and sue the grocery store and (even dairies) where they had purchased their red meat, milk and butter over the years?
Concerns over High Jury Awards
The popular press headlines are frequently filled with cases that resulted in high jury awards to the plaintiffs. These types of articles are often what motivate the client to proceed with asset protection planning. This is easily understood when a planner considers articles similar to the one covering the $38 million jury award to the 26-year-old couple who did not like the way that a Mississippi bank treated them when the bank repossessed their car. [Martha Brannigan, "Why a Mississippi Jury Found a Small Dispute Worth $38 Million," Wall St. Journal, Apr. 12, 1995, at A1.] Also, don't forget that there is the famous McDonald's hot-coffee-in-the-lap case. [Milo Geyelin, "Just Imagine: What Might Have Happened to Noted Plaintiffs Under Legal Overhaul," Wall St. Journal, Mar. 28, 1995, at B1.]
Jury of One's Peers
Wealthy people who have ever needed to consider the right to a trial by jury have frequently know that, if sued, they would never have a jury of their peers. Few litigators can claim to have ever tried a case before a jury comprised of individuals whose average net worth even approached that of the wealthy defendant. In addition to that, juries are prone to playing Robin Hood and rendering verdicts that transfer the wealth of the well to do to the usually much poorer plaintiff. Juries like to engage in class warfare and frankly, the natural sense of most people is that the well to do do not deserve their wealth, they are presumed to be guilty and justice mandates whatever wealth transfer the jury can foist upon them.
Deep Pocket Targets
Frequently, trial lawyers will base part of their case analysis on whether the potential opposing parties could pay a judgment against them. A party with sizeable assets and a veritable unlimited ability to pay is considered a deep-pocket defendant.
An example of this is an advertising campaign by an asset search firm showing two lawyers huddled over a table with one of the lawyers commenting to the other that "the defendant has assets, so let's proceed." The converse to this would be that "the defendant does not have much, so let's not bother."
Many good arguments may be advanced on behalf of the contingency fee system. However, at least as many good arguments may be advanced against the contingency fee system. These arguments include the manner in which the system fuels litigation and otherwise often results in groundless or frivolous suits being brought by a plaintiff's counsel whose hope is to reach a favorable settlement with the client rather than to proceed to a trial on the merits.
Once You've Been Sued, You've Lost
Defendants experience a broad range of powerful emotions. These emotions run the gamut of fear, anger, and self-doubt. Once sued, defendants often feel that no matter what may happen, they have already lost.
The psychology affecting the players in the drama of a lawsuit actually can have a greater effect on the ultimate outcome of the lawsuit than the actual facts. Defendants are at a considerable psychological disadvantage. Experienced plaintiff's attorneys know this and know how to exploit this to the benefit of the plaintiff. In contrast, the defendant may feel as if he or she is carrying the full weight of the U.S. legal system on his or her back.
Often, being sued is a major life event that the defendant wants to bring to an end at the earliest possible moment. Many are willing to pay "too much" to do so. Imagine a scenario wherein a defendant is found not liable five years after the initial complaint was filed and after spending hundreds of thousands of dollars in legal fees. In the interim, the defendant has had many sleepless nights and has suffered tremendously both in terms of anxiety and inconvenience. The defendant's business and marriage likely will have suffered from absences and distractions. But ... the defendant won!! Perhaps it would have been preferable either to have discouraged the suit in the first place or to have been in a position to encourage an early and less expensive settlement.
It is unfortunate that efforts at tort reform have done little to curb the ever-increasing spiral of lawsuits. [David McIntosh, "Without Malpractice Reform, Forget Health-Care Reform," Wall St. Journal, Sept. 22, 1993, at A19.] The nature of the U.S. system where, generally, each party bears its own costs and expenses has the effect of shifting much of the financial burden of litigation to the defendant. Surprisingly to some, the U.S. rule is the exception. Much of the rest of the world follows the "loser-pays" rule.
Deter Litigation
Avoiding the deep-pocket syndrome by reducing the size of the target may itself accomplish much in the asset protection context. Wealth is, of course, a target or a magnet for lawsuits in the United States. Put another way, those with wealth are often involved in many activities that increase exposure to litigation. Similarly, insurance itself, although designed to solve the problem, may simply become a substituted target, and may in fact encourage or attract litigation.
Provide Incentive for an Early and Cheap Settlement
Economics drive the legal system. Personal experience proves that much can be achieved by knocking the "profit" out of the pursuit and by being able to demonstrate to a judgment creditor that being paid is not the given that it was expected to be. Any seasoned litigator would confirm that it is one thing to win a judgment but another thing to collect a judgment.
Level the Litigation Playing Field
A defendant who has no asset protection planning in place will have fewer strategies and defensive maneuvers available at critical points during the course of litigation. A properly designed asset protection plan will, by its nature, create numerous issues with which some future adversary will have to contend. In fact, it may even be possible to tilt the playing field back in favor of the client and thereby obliterate the "once you have been sued you have lost" psychology.
Enhance One's Bargaining Position
Throughout the course of litigation, one who has a well-designed plan in place will have the benefit of a vastly improved negotiating position as a result of the mere fact that the planning was properly conceived and implemented. Well-positioned clients may even have the privilege of playing hardball with the other side.
Provide Options as the Game Is Played
A well-tailored plan will not tie the client's hands or lock the client into a course of action that must be followed regardless of what happens. Rather, it will provide a series of options that would not otherwise exist.
Win the Game
Proper planning will create a series of hurdles that the opponent must clear. With the realization that, deep-pocket driven, an emotional plaintiff may have the stamina and strength to clear the hurdles, the planning must ultimately work because it is legally sound. Therefore, a proper plan will construct a brick wall on the other side of the last hurdle. A plan that merely attempts to stay one step ahead of the pursuit is no plan at all. "Flight" clauses ( and "hop-scotching" jurisdictions may be incorporated as a part of the overall plan, but should not be relied upon to win at the end of the day.
It also is important to note that the plan should be designed to ultimately protect against any potential adversary. Life is more random and less lineal than we would like to think. For example, a client may have some sort of free-floating anxiety over the possibility of a professional malpractice claim being filed at some point in the future. However, a problem of a completely different nature (e.g., a dispute resulting from a future business transaction or a negligence action) could certainly develop. By definition, the proper plan must protect against future perils regardless of source or nature.
Isn't Liabilty Insurance Enough Protection?
Concerns with Traditional Forms of Protection Such as Liability Insurance
The corporate veil seems to be pierced far more than ever before.
In addition, concerns with liability insurance coverage exist as well. These concerns include, but are not limited to, any one or more of the following:
- the solvency of the insurance carrier,
- the insurance carrier's continued willingness to write coverage,
- the existence of policy exclusions (e.g., punitive damages or damages that result from acts of gross negligence),
- having enough dollar amount of liability insurance coverage (who knows how much of an award a jury may come back with or how much you may be sued for)
- inadvertent cancellation of the policy for any number of reasons such as failure to pay premiums on time
- affordability of the premiums
- or the like.
Someone once said that if you fall off of a roof, you are fully covered by your insurance policy until you hit the ground.
Asset Protection Strategies
Among others, we make use of the following strategies for our clients
- Corporations
- LLCs
- Partnerships
- Domestic Trusts
- Foreign Trusts
- Equity rearrangements
- Marital Agreements
- Exemptions provided by Law
- Retirement Plans
Asset protection planning concepts may be applied to protect every type of asset, whether cash, stocks, bonds, business interests, insurance proceeds, jewelry, art, antiques, real property, and so on. Although asset protection planning is typically applied in the context of protecting individually accumulated wealth, a number of applications also exist for the operating business or professional practice.
Visit this link for in depth discussion of various asset protection strategies: Asset Protection Planning Strategies
Definition of Asset Protection Planning
Technically, asset protection planning is the process of organizing one's assets and affairs in advance to guard against risks to which the assets would otherwise be subject. The phrase "in advance" warrants strong emphasis. One who is planning to protect assets must be cautious and avoid the negative implications that may follow if there are creditors who are entitled to remedies under applicable fraudulent transfer and similar laws. Asset protection planning may be applied to protect every type of asset, including an operating business or a professional practice
The History of Asset Protection Planning
Safeguarding assets from the many risks involved is not a new idea or planning goal. Asset protection is more in the forefront of planning because of expanding theories of liability. New liability theories are sometimes coupled with results-oriented judges and juries who decide things based more upon a perceived desired outcome than upon the law.
An ever-present concern includes some of the high dollar amounts of jury awards that we hear about today. Asset protection must be addressed in the new legal arena because of concerns with the adequacy of traditional forms of protection. Although there are arguments for and against the contingency fee system, it is undeniable that our current legal system, coupled with contingency fees, has helped contribute to the litigation explosion. For this reason, asset protection planning is increasingly important .
Goals of Asset Protection Planning
The overall goal of any asset protection plan is for the client to ultimately win the game. Once goals are discussed with you, we incorporate them into both the asset protection and estate planning components of your business and estate plan.
What Asset Protection Planning Is Not
As important as it is to know what an asset protection planning component is, it is equally important to know what it is not. Asset protection planning will not aid a client in evading the payment of taxes. Asset protection planning does not use the concept of hiding assets but works in general to protect those assets. A hidden asset may be found, but a protected asset is a more secure one. Asset protection cannot be used as a means of defrauding creditors . Planning and implemenation must have good business reasons and be achieved before a creditor issue ensues.
Estate Planning and Asset Protection Planning
Asset protection planning is but one component of integrated estate planning. The other two components are estate planning and financial planning. Asset protection planning may be viewed as the lifetime side of estate planning, and may be defined as the process of organizing one's assets and affairs in advance in order to guard against risks to which the assets would otherwise be subject.
In order to guard against such risks, in most situations, assets will be transferred from an unprotected form of ownership (e.g., direct individual ownership) to a different type of ownership or asset using an asset protection vehicle. Sometimes this transfer may involve moving assets from a nonexempt asset to an exempt asset. Other times, such a transfer may be to a family limited partnership. In many cases, the family limited partnership will be combined with a foreign integrated estate planning trust (IEPT) to maximize both the asset protection and the estate planning goals of the client.
Asset Protection Planning must be Accomplished in advance of its purpose
The concept of asset protection planning in advance cannot be stressed enough. Since asset protection planning generally involves the transfer of assets from a less protected to a more protected asset protection vehicle, everyone involved in the plan (including the planner) must endeavor to avoid establishing a protection plan after the client's assets have been "attacked."
Protecting assets after there are creditors entitled to the remedies under the applicable fraudulent transfer act or similar laws could open the client and planner to criminal and/or civil action. All involved in the asset protection plan, including the planner, must be cautious and avoid the negative implications that may follow from failing to plan to protect assets in advance of when there are creditors who are entitled to remedies under applicable fraudulent transfer and similar laws.
Use Multiple Entities
Those who have more than one type of business should use different entities to conduct each facet of the business. The goal is to insulate each separate business from liabilities produced by the other activities.
Physicians operating more than one clinic should never hold ownership in a single entity. Similarly, if you own several real estate properties, use different entities to hold each one. If there is a lawsuit in connection with one of the properties, the others won’t be endangered. The same logic would be applied if you owned properties and also performed property management services for others. You would want to separate the management business from the ownership of the properties.
As a general principle, the ownership of Dangerous Assets, those with a high risk of producing liability, should always be separated from Safe Assets, such as cash or securities. These Safe Assets should not be jeopardized by a liability associated with your business or other Dangerous Assets which you own.
For example, John owns a restaurant and has substantial retirement savings in the bank. If he was sued because of a liability in connection with the restaurant, his retirement savings could be lost. Instead, merely by putting the restaurant in an LLC, he can remove the Dangerous Asset from his legal ownership. Then, any lawsuit against the LLC, which owned the business, would not place his other assets at risk.
It should be obvious that in an age of litigation roulette, emotionally swayed juries, sometimes biased judges, opportunist politicians funded by special interest groups and the glut of attorneys, no plan is fool-proof. Many Judges, juries, lawyers and politicians are always looking for ways to undermine the best laid plans, depending on their political, monetary, or social philosophies. Facts and Circumstances also play a part. So, the objective in Asset Protection planning is to design and implement the best most flexible plan; not one that is an absolute guarantee of asset protection. In fact, there is no such thing. That is, there is no such thing as a fool proof and guaranteed plan. You plan the best you can, ahead of time, then make adjustments where possible, then wait....
Avoid Fraudulent Transfers
Fraudulent Transfer Laws
Every asset-protection plan must take into account the fraudulent transfer laws. A violation of these laws can result in professional discipline, civil liability, and/or criminal liability. There are two broad categories of fraudulent transfers:
- Transfers made with "actual intent to hinder, delay, or defraud" a creditor (CC §3439.04(a)(1)); and
- Constructively fraudulent transfers.
Actual Fraud
Actual fraud can be established by direct evidence, although it is more likely established by the presence of the "badges of fraud," i.e., factors courts have traditionally considered in inferring fraudulent intent. Although there are many badges of fraud, the most important are insolvency of the transferor and the lack of adequate consideration received in exchange for the transfer. As a rule, transfers undertaken for estate planning purposes lack consideration.
Badges of fraud listed in the statute include (CC §3439.04(b)):
- The transfer or obligation was to an insider;
- The debtor retained possession or control of the property transferred after the transfer;
- The transfer or obligation was concealed;
- Before the transfer was made or the obligation incurred, the debtor had been sued or threatened with suit;
- The transfer was of substantially all of the debtor's assets;
- The debtor absconded;
- The debtor removed or concealed assets;
- The value of consideration received was not reasonably equivalent to the value of the asset received or obligation incurred;
- The debtor was insolvent or became insolvent shortly after the transfer was made or obligation incurred;
- The transfer occurred shortly before or after a substantial debt was incurred; and
- The debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider.
The presence of these badges of fraud allows a court to infer that a transfer was fraudulent, in the absence of direct evidence of fraudulent intent. See, e.g., U.S. v Townley (ED Wash, July 29, 2004, No. CS-02-0384-RHW) 2004 US Dist Lexis 29722, aff'd (9th Cir 2006) 97 AFTR2d 2484, in which the court held that irrevocable trust assets could be reached to satisfy a judgment against the settlors even though they were not named beneficiaries of the trust. The court concluded that there was direct evidence of intent to defraud in the form of a statement that the transfers were intended to protect the transferred assets from the claims of future judgment creditors. However, the court also concluded that the trust could be disregarded because it was the "alter ego" or "nominee" of the settlors under a six-factor test using traditional badges of fraud.
Constructive Fraud
Constructive fraud arises when a transfer is made without fair or adequate consideration, and the debtor:
- Is insolvent, or is rendered insolvent as a result of the transfer (CC §3439.05);
- Engages in a transaction or is about to do so with unreasonably small capital (CC §3439.04(a)(2)(A)); or
- Intended to incur or believed or reasonably should have believed that he or she would incur debts beyond his or her ability to repay (CC §3439.04(a)(2)(B)).
Constructive fraud does not require fraudulent intent.
Transfers made to implement estate planning will clearly be for inadequate consideration. For this purpose, adequacy of consideration is determined from the point of view of the creditor. Travellers Int'l v Trans World Airlines (In re Trans World Airlines) (3d Cir 1998) 134 F3d 188.
For purposes of fraudulent transfer law, insolvency is determined under a modified balance sheet approach that excludes assets that are not available to creditors, such as assets held in an exempt retirement plan and assets that are outside the jurisdiction and, therefore, unavailable to creditors. Contingent liabilities are taken into account at their probable values. See Spero, Asset Protection: Legal Planning and Strategies and Forms ¶3.04[1][c] (2002).
Use an Experienced, Knowledgeable Asset Protection Lawyer; Avoid the Use of Non-Lawyers for Asset Protection Planning
A recent phenomenon is the entry of accountants and other non lawyers into the the provision of legal services including the asset protection planning specialty and sector. Legal web sites are offering cut rate legal servcies including the formation of corporations and other vehicles that are oftentimes incomplete and are sold to the unsuspecting client without instructions on how to implement the new entity, for example.
Non lawyers and Internet legal document web provider sites are not only totally unqualified to engage in this sort of planning, but for reasons I will discuss below, their planning will often put you into much worse shape than if you had done nothing at all.
Fundamentally, if you really think about it, asset protection is 'Pre-Litigation Planning,' i.e., doing things in anticipation of going to court and standing in front of a hostile judge with determined creditor's counsel making arguments about how to get at assets. This requires knowledge and experience in the areas of debtor-creditor law, commercial law, civil procedure, conflicts of law, judgments & remedies, bankruptcy, etc.
Note that 'tax' isn't included in the foregoing. The only time that tax law is implicated in asset protection planning is in figuring out the tax treatment of certain transactions, but basically tax has nothing to do with asset protection planning, except that you don't want to make a tax error while you are doing the planning.
Another way to say this is that you don't let the anesthesiologist do the cutting.
What happens is that accountants have this terrible tendency to assume that because something is X for purposes of the Internal Revenue Code, that it must be X for purposes of civil law also, but this simply isn't the case. With regard to asset protection issues, there is often inconsistent treatment of situations between civil law and tax law, and this is where accountants most often get into trouble.
Unfortunately, accountants are also unaware of criminal laws, and assume that if something is permissible in the Internal Revenue Code, that it must be legal. Thus, in two of the landmark asset protection disasters, Lawrence and Brennan, the plans in each case were put together by the client's accountant, who got the clients indicted for bankruptcy fraud and money laundering, and the accountants themselves were also indicted on a variety of theories. Ugly.
Unless an attorney is directly involved and retains the accountant, communications between a client and an accountant are not subject to attorney-client privilege. This means that anything the client and the accountant discuss will be known to creditors, creating evidence of actual intent to defraud creditors.
Finally, by law attorneys are privileged to assist clients with certain types of transactions, but accountants are not, meaning that if the transaction goes south, the accountant and the client may have created the additional liability of civil conspiracy, thus making the client potentially worse off than if he had not engaged in the planning at all.
It has been observed that in collection cases where an accountant did the planning, the first thing to do is to add the accountant as a co-defendant under a civil conspiracy theory. Since the accountants Errors & Omissions insurance doesn't cover intentional torts like civil conspiracy, it creates a tremendous amount of leverage on them to assist in unraveling the debtor's asset protection plan, in addition of course to creating another (usually easy) source of funds to collect.
[Some accountants believe that they have something like an attorney-client privilege with their clients. They don't, but rather have a very weak privilege as to actions brought by the IRS for taxes only, i.e., the privilege does NOT apply in civil lawsuits, bankruptcy hearings, etc. Really, this doesn't help you as the client at all.]
In conclusion, be careful treading into this area without legal counsel. Things are complex and perilous enough even if you have an attorney guiding you.
Return to top
Liability Insurance as Asset Protection? Are you sure about that?
When a plaintiff's litigation or personal injury attorney completes his initial consultation with an injured potential client, he’ll assess the damages suffered and add in the cost (and potential profits) of his firm should he decide to take the case.
The very first move he makes is to look for evidence of insurance to cover part, or all of his client’s damages, as well as pain and suffering if warranted by law.
Liability coverage – coverage that is, held by the defendant (YOU), is only part of his search. Next, he’ll determine what, if any, your personal assets total up to in worth.
You’ve heard it said, “Can’t get blood from a turnip”? A turnip, in these circumstances, represents the case that an attorney turns down for lack of available assets to achieve a financial recovery for both his firm and his client. A turnip simply costs more than the case is worth to pursue in court.
I am not suggesting you refrain from living life responsibly. It is prudent and a cost of citizenship as well as courtesy, to have some liability coverage. However,in today’s litigation-prone state, it is a good strategy to, at least, look like a 'turnip'.
A legal defense is expensive, time consuming, and anxiety inducing. Further, losing a case is the worst case of all. But, cases are lost all the time. Someone has to win and someone has to lose in litigation.
Clearly, plaintiffs' attorneys cannot afford cases that don’t offer enough compensation to compensate their clients handsomely, as well as cover court costs, investigations, staff time and a profit margin for the lawyer …they too, after all, are a business.
Furthermore, a successful plaintiff’s firm needs a lot of low-hanging profitable fruit to afford big cases that can take years to win and are expensive to prosecute on a contingency bases – if they lose, they also lose their fee. Cases with good liability insurance and unprotected personal and business assets are such low-hanging fruit. That is what you are if you do not have asset protection planning in place, well ahead of the lawsuit.
As more consumers strive to reduce premium costs, many keep liability coverage to a minimum, which creates an even greater risk of their unprotected personal and business assets falling under siege as well.
Others, seeking greater protection from liability, increase overall insurance with an additional, cost-effective umbrella policy -- an added layer of liability coverage for their home and auto, usually to the tune of $1 to $2 Million. This is an attorney’s dream opportunity, of course, and can turn a rather small case into a large one very quickly because the more insurance, the more of a recovery and contingent fee he gets.
In most cases, the amount sought in the suit will include the “limits of liability” afforded by the standard, baseline insurance policy, adding to that amount, the limits of your umbrella coverage.
Finally, just in case you think you’re in the clear with all that expensive insurance protection, he’ll assess any assets you hold personally, including your home and business.
If your pockets run deep between personal/business assets with verifiable equity, you can bet the settlement amount requested will exceed your insurance, if for no other reason than to provide a winning strategy for a high, out-of-court settlement negotiation.
Multi-million dollar settlements today are commonplace. Imagine a scenario where an auto accident is determined to be your fault, leaving another severely injured and unable to work for a year or more. The financial damages, including necessary hospitalization and recovery costs, loss of wages, etc, could easily exceed your insurance coverage, even with an umbrella policy. Next in line would be your home, your investments, your retirement and your business. Possibly even YOUR LIFE, if you run out of funds for living needs and health care.
By utilizing proper asset protection strategies to protect your assets, business and otherwise, your overall personal wealth on paper is greatly reduced. Furthermore, by placing the title to your home into an asset protection vehicle such as a properly structured Family Limited Partnership, or trust, your most valuable personal asset would be untouchable, leaving only the limits of your liability insurance for the taking.
Remember too, liability insurance does nothing to protect you from a lawsuit based upon other grounds (beyond accidents), such as
- I.R.S. assessments,
- fraud,
- other non covered conduct
- disgruntled employees,
- future spouses;
- opportunists with nothing to lose;
- etc.
However, a business properly incorporated along with a Family Limited Partnership can protect you from loss in these cases as well because you control the assets, but don’t own them personally.
While you may be able to reduce insurance premiums by lowering your overall liability coverage – recommended only when your assets are fully protected – basic liability coverage continues to be prudent (mandatory in most states) and in most cases, will force an attorney to simply deal with your insurance carrier for any settlement achieved.
Also, while you’re breathing a sigh of liability relief after protecting your assets now, consider the possible tax savings as well as beneficial estate planning associated with true asset protection that you’ll continue to enjoy for years to come.
Because of the Fraudulent conveyance rules, and the lack of knowing what can happen in the near future, don't wait until it’s too late.
Return to top
Additional Asset Protection Articles and Strategies
Return to top