Why Asset Protection?
(Reprinted from the MahanyLaw blog. Please visit our blog for many other informative articles and topics.)
Asset protection is like insurance. It is a form of risk management. Most of us worked very hard to acquire the things we have. Asset protection helps insure those things will still be available to us when we need them or retire. For some, it means insuring that our children and grandchildren will be properly provided for.
Unlike insurance, however, asset protection is the last line of defense. It is there to protect your assets when a creditor is likely to win and conventional strategies and insurance is insufficient or not available.
Asset protection is an ever evolving and constantly shifting field of law. As noted above it is risk management not risk elimination. Avoid any promoter or professional who claims a plan guaranteed to eliminate all risks.
An asset protection plan should be considered a living document. Chances are it won’t be effective if you simply place it in a drawer and forget about it for 20 years. Quality asset planners conduct annual reviews and insure the plan maximizes benefits while minimizing risks.
For your part, you must have extensive discussions with your planner to insure he or she understands your life goals and what assets need protection. You should also promptly notify your asset professional if you change your legal or physical domicile, modify family relationships (such as a divorce), create or change business relationships or purchase property.
An attorney friend of mine wrote, “High net worth individuals attract jackals like flies to open meat. From the High Street banks of London to the sky-lined harbor of Hong Kong, from the oil-drunk billionaire princes of small Middle Eastern desert nations to the newly christened, champagne and caviar millionaires of Moscow and new Bordeaux loving, Bentley driving millionaires of Shanghai, with their condominiums in 7-star Dubai resorts and luxuriant vacations to Brazilian beaches, the worldwide demand for internationally attuned asset protection planning pervades the world continent of the well-healed and well-to-do, old money and new money alike…” I have yet to represent a Bentley driving millionaire from Shanghai but many people interested in quality asset protection are middle class Americans, small business owners and medical professionals fearful of runaway juries and malpractice suits.
According to one published statistic, $15,000,000,000,000 flows through the global banking market annually. Much of that money flows through Caribbean banks, under the watchful eye of federal and Interpol authorities, aided by Belgian exclusive control of the technology that provides for inter-bank wire transfers and the market dominance of U.S. credit card companies (Visa, Mastercard, Discover and American Express) who turn over customer records upon governmental or judicial request and usually without notice to the client. Although you cannot keep the government from knowing what you are doing with your money, your personal affairs should never be subject to easy public inquiry.
A secondary goal, then, of asset protection is maintaing your financial privacy. That is, keeping private creditors from finding out about your financial picture.
There are several critical questions with any asset plan. Where should I place my assets (domestic versus foreign accounts)? What will be the domicile of the entity created to hold these assets (they need not be one in the same)? And how many layers of protection and how much diversity do I need?
Because of the changing nature of international and domestic laws, the prevalence of unsavory plaintiff’s lawyers, unstable governments, eroding currencies and monetary systems on the verge of collapse, many may wish to have a plan with multiple layers. In other words, don’t put all your eggs in one basket.
Every plan is different and everyone has different needs and risk tolerance. Plans, then, that are mass marketed on the Internet probably will not achieve your goals and at worst, may both fail and subject you to prosecution.
Prosecution? The Internal Revenue Service views you as an American citizen no matter where you hang your hat. Build offshore structures with the goal of not paying taxes on what the government claims you owe is a sure ticket to trouble. Unfortunately, some promoters make these pitches in an attempt to get your business. Will they still be around, however, when trouble strikes? Probably not.
The objectives of asset protection are simple:
- Protection of your capital and assets from third parties.
- Protection of testamentary wishes (intergenerational transfers).
- Unhindered access and use of property during one’s lifetime.
- Sufficient revenue to support one’s chosen lifestyle.
How does one accomplish these objectives? Beyond obtaining proper insurance, the common answer is by transferring ownership of the property to a third party. To best protect you from creditors, state collapse, failure of the banking system and other exigencies, one must forego a certain amount of control of those assets. The difficulty in any plan is how to give up control without losing the benefits of those assets.
Some “fly by night” promoters simply have you “repaper” your assets. It sounds easy and is certainly cheap BUT it rarely works. Even if a private investigator can’t find the assets the courts still retain their contempt power. Power that can compel you to disclose information about the assets and power to force you to disgorge or repatriate that assets. In other words, simply “hiding” your assets will only work for the least sophisticated creditors.
The threat of court ordered disgorgement of your assets, of course, is greatly diminished if the plan is properly constructed.
Speak to your attorney to discuss the many ways of protecting your assets while still being able to enjoy the benefits of those assets.
At MahanyLaw, we pride ourselves on listening to our clients needs and building asset protection plans and structures that maximize your financial safety. Attorney Brian Mahany has practiced law for over 25 years and represented clients across the United States. If you seek a quality, tailored product, contact Brian at 414.704.6731 or via email, brian@mahanylaw.com. Appointments available throughout the United States.