Asset Protection Attorney
What can an asset protection attorney do for you?
If you are looking for asset protection, you may have read about Cook Island Trusts, Nevis LLCs, Nevada Corporations, South Dakota Dynasty Trusts, Alaska LLCs, land trusts, do-it-yourself programs, “asset protection professionals” who are not attorneys, free lunch seminars to bullet-proof your financial future, and many other programs and products that claim to protect your assets. There are hundreds of tools in the toolbox. Some are a fraud, some are a waste of money, and some have devastating tax consequences or unintended legal consequences that you may not suffer for months or years. A good asset protection plan is designed by someone with the expertise and experience to ensure that the plan will effectively accomplish your objectives without undue cost and without trapping you into something that you may later regret.
I am an asset protection attorney, a tax attorney, and a law school professor. My focus has always been estate planning and asset protection. I do asset protection planning that is ethical, professional, efficient, thoughtful, and eminently effective. If needed, I can provide ongoing support to back up any plan that I create. I am confident that I can compete on price with any other alternatives that you may find.
If you will call or email me with a brief explanation of what you are trying to accomplish and protect, I will send you a free proposal for a plan that is best for you.
10 Essential Elements of a Good Asset Protection Plan
The 10 essential elements of a good asset protection plan are:1. Assessing the timing of the plan and the potential liabilities that you may have.
2. Documenting valid business purposes in addition to asset protection.
3. Ensuring that you do not do anything unethical or illegal.
4. Creating a well thought out strategy behind any entities or structures used in your plan.
5. Carefully drafting flawless legal documents.
6. Providing flexibility so you don’t get into something that you can’t get out of or that you can’t change over time.
7. Assisting you in transferring assets and funding legal entities.
8. Instructing you how to properly operate and administer the entities so you don’t ruin your asset protection by commingling funds or disregarding legal formalities.
9. Teaching you and your CPA how to properly report and disclose your assets and entities so you don’t destroy your own plan through improper reporting or inaccurate financial statements.
10. Supporting the plan in the future by providing ongoing consultation and support as needed to defend the plan if it is attacked.
By utilizing these 10 elements, we can be confident that your plan will be an unassailable source of security and peace of mind for many years to come.
Tools for Asset Protection Planning
There are hundreds of tools that can be used in asset protection planning. These include the use of state property exemptions, homestead exemptions, marital property laws and agreements, and all kinds of trusts, partnerships, limited liability companies, corporations, and other legal entities. They also include liens, leases, loans, sales, and all kinds of contracts and legal documents. Each of these can be used in a manner that is effective and powerful, or they can be used in a manner that is ineffective, useless, problematic or fraudulent. It is critical to realize that it is usually not the type of entity that makes or breaks an asset protection plan, it is the strategic use and implementation of the entities that makes the difference.
For example:
1. Martha asked me to review her mother’s trust. Her mother had put the family farm in a trust in order to “protect it from Medicaid.” The daughter was worried because the trust was prepared by a personal injury attorney, not a trust attorney. I discovered that the transfer of the farm to the irrevocable trust, if not resolved, would result in millions of dollars of gift taxes. It also created a completely inflexible arrangement that could not be changed or amended if there was a change in the laws or the circumstances or wishes of the family. There is nothing wrong with an irrevocable trust, but if it is created by someone who doesn’t know what they are doing, it can be much worse than doing nothing at all.
2. Joe was in a dispute with his business partner and he wanted to hide and protect his personal assets in the event of a lawsuit between them. Joe purchased a Wyoming LLC from an internet marketing company because they promised it would provide complete confidentiality and asset protection. When his business partner sued him, they were able to discover everything about the Wyoming LLC and its assets, and they easily got a court order dissolving the Wyoming LLC. This is not because a Wyoming LLC cannot provide confidentiality and asset protection, it is because it was not implemented correctly.
3. On a more positive note, a man had a judgment against him from a prior business deal, but the creditor had not pursued it in a couple years. The man transferred significant amounts of real estate to a number of LLCs for valid business reasons. The creditor assigned the judgment to a more aggressive plaintiff. Despite the relentless efforts of the new plaintiff, the courts ruled that the defendant had made the transfers for valid business reasons and the plaintiff had no right to dissolve the LLCs or encumber the real estate.
These examples demonstrate the fact that asset protection programs and products are only as good as the expertise, experience and care of the person who designs and implements them. However, some asset protection tools are better than others. Below is my list of the top ten asset protection tools.
Top Ten Tools for Asset Protection Planning
1. The Cook Islands Trust. The Cook Islands Trust is universally recognized as the ultimate in offshore asset protection. The Cook Islands has the best laws, the best infrastructure, and the most debtor-friendly courts of any of the offshore asset protection havens. The disadvantages of a Cook Islands Trust are: (1) the cost to set it up and maintain it, (2) the IRS reporting requirements for an offshore trust, (3) the negative stigma associated with an offshore trust, and (4) this only works if you do it at a time and in a manner to avoid a fraudulent transfer claim. However, if you have the money to justify the cost, and if you can do this in advance of a problem, this may be the best protection that money can buy.2. The Third Party Irrevocable Trust. All 50 states recognize support some degree of asset protection for a third party irrevocable trust. This is a trust that you create for the benefit of your spouse, children or any other beneficiaries not including yourself. The assets are protected from the creators of the grantor because the grantor has irrevocably given up all rights to the assets that are transferred to the trust. In most states, the assets are protected from the creditors of the beneficiaries because of the spendthrift clause and the discretion given to the trustee to withhold assets from the beneficiaries. These trusts are less expensive than an offshore trust, but the grantor cannot be included as a beneficiary.
3. Self-Settled Trusts created under the laws of Nevada, Alaska, or Delaware. A few states now protect the assets of an irrevocable trust from the creditors of the grantor even if the grantor is included as a beneficiary. The best states in which to form this type of trust are Nevada, Alaska and Delaware. These trusts can also be moved offshore in the future if desired.
4. The Nevis LLC. Nevis LLCs can provide great confidentiality because Nevis does not disclose the managers or members of a Nevis LLC. Also, a Nevis entity is not subject to a court order from a US court. Nevis LLCs are relatively easy and inexpensive to establish and maintain. If you document a good business purpose for investing in a Nevis LLC, it can be nearly impossible for a creditor to liquidate. Nevis LLCs can be used in conjunction with an offshore trust or they can provide an excellent and cost-effective alternative. (See www.NevisLLC.org)
5. The Alaska LLC. The Alaska LLC is not great for confidentiality because the members and managers are part of the public record. However, an Alaska LLC may be the best in any state for protecting the company from the creditors of a member. (See www.AlaskaLLC.net)
6. New Mexico LLCs. Although Alaska provides the best protection to the company from the creditors of a member; New Mexico provides the best confidentiality because you don’t have to disclose the managers or members of an LLC. New Mexico LLCs are especially good to use as a holding company that is owned by another protected entity.
7. The Dynasty Trust. This is a variation on the irrevocable trusts described above where the assets are also protected from estate taxes and generation skipping taxes for multiple generations. (See www.EstatePlanningStrategies.net)
8. The 678 Trust. This is another type of irrevocable trust that can be used to protect assets from estate taxes, generation-skipping taxes and all kinds of creditors. Instead of creating your own asset protection trust, you might be better off to get your parents or some other person to create the trust for your benefit. Section 678 of the IRS code provides a way to make the trust taxable to the beneficiary and this can be of great benefit to you under certain circumstances.
9. Marital Property Agreements. In every state a couple has the right to own separate property if they follow correct legal procedures. If done properly, the creditors of one spouse have no ability to attach or encumber the separate property of the other spouse. If you have a “safe spouse” and a stable marriage, this may be an effective option.
10. Leases, liens and equity stripping. The use of a friendly lien is another strategy that is oversold and commonly applied in a manner that is unreliable. However, if done correctly, it is possible to effectively protect the equity of an asset through the use of liens and equity stripping. It is also possible to lease a home or other property from a friendly entity in order to protect the asset from potential creditors.
It is not possible to write a book or article long enough to cover all the tools, all the variations, and all the options involved in asset protection planning. This is especially true because of the fact that the laws are constantly changing. The only solution is to work with an experienced attorney who specializes in this area and stays on top of the latest laws, court cases, issues and options.
I am an asset protection attorney, a tax attorney, and a law school professor. I do asset protection planning that is ethical, professional, efficient, thoughtful, and eminently effective. I will provide ongoing support for any plan that I create. If you are interested in asset protection planning, call me or send me an email with a summary of your situation and I will send you a free proposal designed just for you. lee@lsmlaw.net
