WHAT IS ASSET PROTECTION?

Asset Protection is the legal process of protecting your personal and business assets by putting them beyond the reach of future potential threats and creditors.

Asset Protection is not about hiding your possessions or avoiding responsibility, it is about limiting the risk of lawsuits and structuring your property so that you don’t lose your life’s work in a single lawsuit.

Asset protection provides balance in a world where litigation has gone to extremes.

DO I NEED ASSET PROTECTION?

Your Wealth is at Risk! 

• More than 20 million civil lawsuits were filed in 2018.

• The Plaintiff wins 56% of the time with an average final aware of $28,000.

• 4% of Plaintiffs win $1,000,000 or more (percentage is increasing).

• Frivolous lawsuits cost Americans more than $200 Billion a year (half of that goes to lawyers).

• There are 1.34 million lawyers in the U.S. and increasing every year.

• Most Americans strongly agreed that the justice system is used by many as a lottery, to start a lawsuit and see just how much they can win. 

Even if you successfully defend a lawsuit, it can cost you tens of 

thousands of dollars in attorney’s fees and expenses.

It takes a lifetime to build your wealth, but only it only takes a single moment to lose it.

WHAT IF I DON’T HAVE MUCH?

Everyone needs some form of asset protection. In fact, the average person with $100,000 in assets needs protection more than a wealthy person with $5,000,000 in assets. If the wealthy person loses a lawsuit for $1,000,000, she will have enough assets to pay the judgment and still have $4,000,000 left over. The wealthy person doesn’t want to pay that amount, but she will not be broke after paying. If the average person loses a lawsuit for $1,000,000, she would lose her entire savings and still owe money. Her ability to save and build wealth in the future will be catastrophically wiped out! In relation to the level of wealth, the average person stands to lose a greater percentage of her wealth and thus would need asset protection even more than the wealthy person who can afford to pay that judgment.

A good asset protection plan should be individually tailored to protect your current and future assets, even if you don’t have many assets now. 

WHAT IF I ALREADY HAVE AN ASSET PROTECTION PLAN?

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A reliable asset protection plan needs to be reviewed on a regular basis and adjusted to meet your specific current needs, circumstances, and property. 

Assets change, circumstances change, laws change.

Make sure your plan is up-to-date and you are protecting every asset. It is easy to acquire property in the course of your life but forget to structure it properly to protect it.

3 RULES OF ASSET PROTECTION PLANNING

1) Protect yourself BEFORE you have a problem

You can’t buy car insurance after you have an accident, you can’t buy health insurance after you get sick, you can’t buy life insurance after you die, and you can’t implement asset protection after you get sued. You must be proactive and put your Asset Protection Program together before you get sued.

2) Start with a basic plan, add firewalls as needed

Most people don’t need elaborate structures or plans. In fact, many times an elaborate plan can devolve into a costly and confusing nightmare to maintain. Start simple; as your assets grow, your plan can grow. Talk to an asset protection specialist to make sure that your plan is keeping up with your circumstances and adjust it as needed.

3) Don’t look for a “magic bullet” or “cookie-cutter” plan.

Asset Protection cannot be done in a cookie-cutter fashion. There is no magic bullet or one-size-fits-all approach. Asset protection must be custom tailored to fit your unique needs and circumstances. This will change depending on what your assets are, what your liabilities and risks are, your unique goals, and the specific laws of your state.

The 5 Biggest Mistakes People Make in Asset Protection

1) Hiding Your Assets

2) Titling Your Assets to “Straws”

3) Titling Assets to Your Spouse

4) Committing Fraudulent Transfers

5) Breaking Laws

1) Hiding Your Assets

Asset protection is not about hiding or secrecy, it is about protection. There is an important distinction between hiding and privacy. Some people think that they will be able to hide their assets so if they are sued, then no one will know will about their assets and thus they will be protection. You should assume that if you are sued at some point you will have to disclose where your assets are. Lying about your assets is illegal and could result in perjury. A proper assets protection plan will allow you to confidently tell everyone what your assets are knowing that they are protected. 

On the other hand, you have a right to privacy and a proper asset protection plan can help you keep ownership of your property private. Privacy is not asset protection, but it can be an effective tool in discouraging lawsuits if it appears that you do not own anything.

2) Titling Your Assets to “Straws”

Some people think they will be protected if they put their assets under their sibling’s name or their best friend. But what is to prevent that person from being sued? I have seen instances where the brother held title to the client’s assets but then the brother was in a serious accident, was sued and the injured party was able to take the brother’s assets, including the client’s assets. Or, maybe the sibling or friend gets a divorce and now his spouse has a claim on the client’s assets. 

There is also the problem that your trusted sibling or friend might decide to use your property for their own benefit – and if they have legal title to the property, they can. And don’t think you’ll just transfer title to someone else if you get sued, that would be considered a fraudulent conveyance and the court would reverse the transfer. The only way to protect your assets is to purposefully create the proper legal structures to hold title.

3) Titling Assets to Your Spouse

This is a common mistake I hear quite frequently from doctors and business executives. They erroneously believe that by giving their spouse title to their property that the property will be protected if they get sued. However, there are several problems with this arrangement. First, many courts will not respect this arrangement, especially if the property was acquired during the marriage. Second, no one is immune from a lawsuit and your property is not protected if your spouse gets sued. Third, with a national divorce rate nearing 50%, it is a risky gamble to give the spouse everything. No one wants to consider that they might get a divorce or that their spouse might cheat them, but most people don’t start a business with the expectation that their partner will steal from the company, yet statistically theft by a partner is not uncommon. Asset protection is about preparing for the worst, while optimistically expecting the best.

4) Committing Fraudulent Transfers

This occurs when you try to protect yourself by transferring your property after you have been sued. Courts consider these types of transfers to be presumptively fraudulent and will reverse the transfer, so it will not protect you. Additionally, it makes you look really bad to the court. By the time you have been sued, it is too late to put into place an asset protection plan. 

5) Breaking Laws

Breaking the law will never result in asset protection. Many attorneys and companies are trained to discover hidden assets and expose fraudulent transfers. Illegal tax shelters or tax avoidance structures can result in legal sanctions and possible criminal prosecution. There is nothing wrong with usually offshore accounts, offshore banks, or offshore trusts, and various structures that protect your assets and/or reduce your tax burden, but they must be structured and reported properly and lawfully in order to get the protection and avoid added problems.

Proper asset protection requires proactive planning 

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Ernst and Young Entrepreneur,
Billion in Revenue