Back to the Basics of Asset Protection

September 23rd 2014

We spend so much time dealing with the technicalities and the nitty-gritty of Asset Protection that sometimes we forget about the basic principles.

1. Asset Protection is Contextual: There is no ‘one-size-fits-all’ strategy in asset protection. In other words, an asset protection plan that works for one person may not work as well for another. For example, if Mr. White has $5 million in cash, and Mr. Black owns $5 million is commercial real estate, the strategies that will work for Mr. White might not work for Mr. Black, even if they are otherwise similarly situated. Similarly, if both Mr. White and Mr. Black each has $5 million in cash, but one is been pursued by a lender and another by a tort claimant, the strategies may well be different. Other variables, such as the state in which they reside or whether they are single or married, will dictate different Asset Protection planning.

2. The Earlier the Better: We have lost count of how many times we have had to tell potential clients that we could have helped them had they visited us earlier. A transfer of assets that occurs after a lawsuit is threatened or filed cuts down the options available, because the transfer is likely to be deemed a "fraudulent conveyance." Done early enough, the chances of success increase dramatically.
3. There are No Magic Bullets: Our clients often want to know if the Asset Protection strategy we intend to employ will "work." If someone owes $1 million, and as a result of an Asset Protection plan that we put into place early enough the creditor is forced to settle for $100,000, did the plan "work"? To the extent of the $900,000 the creditor may have otherwise seized, the plan "worked." Generally, Asset Protection is about building a fortress so high and a moat so wide that the creditor is dissuaded from instituting the fight or gives up and settles cheap when the creditor realizes how costly and lengthy the fight will be.
4. It is Not About Hiding Assets: We are often asked how a creditor will "discover" our clients' assets. That’s the wrong question. We don't "hide" assets for the simple reason that hiding assets won't work in the face of aggressive and intelligent creditors. Instead, Asset Protection is about structuring your assets so that even if a creditor knows where your assets are, he can't get at them. That works a lot better.