Protecting Your Assets
The old adage “a penny saved is two pence dear” (Richard Saunders, a.k.a. Benjamin Franklin) is apropos. Having accumulated wealth, one must protect it, lest it be taken by another… including the government.
These days doctors, accountants, corporate officers and business and property owners all face increased risk from out-of-control jury awards and zealous regulators. Many individuals rely upon insurance to protect them, but judgements can exceed coverage, and insurance carriers often find reasons not to cover certain incidents.
The time to tuck assets behind shields is when you are not being sued. Wait until a creditor comes calling and there is a greater risk a transfer will be invalidated by a court.
There’s a side benefit to thinking holistically. Some tax planning, for example, using a family limited partnership to reduce the taxable value of gifts, holds up best when it’s done for non-tax reasons.
Our strategies and tactics are based upon sound law. We take a safe approach with client stratagems, focusing on concepts and designs that have been tested and have passed muster with the IRS or other governing bodies.
Yes! We do make house calls.
Asset protection (sometimes also referred to as debtor-creditor law) is a set of legal techniques and a body of statutory and common law dealing with protecting assets of individuals and business entities from civil money judgments, and sometimes from taxes. The goal of all asset protection planning is to insulate assets from claims of creditors, including the IRS.
Asset protection consists of methods available to protect assets from liabilities arising elsewhere. It should not be confused with limiting liability, which concerns the ability to stop or constrain liability to the asset or activity from which it arises. Assets that are shielded from creditors by law are few (common examples include some home equity and certain retirement plans. Assets that are almost always unreachable are those to which one does not hold legal title. In many cases it is possible to vest legal title to personal assets in a trust, an agent or a nominee, while retaining substantial control of the assets.
United States federal bankruptcy laws and ERISA laws exempt certain assets from creditors, including certain retirement plans. All fifty states also have laws that exempt a few assets from creditors. These vary from state to state, but they often include exemptions for a certain amount of equity in a personal residence, individual retirement accounts, clothing, or other personal property.
Offshore Options – In addition to the choices for on-shore protection, there are also considerable options in moving legal ownership of assets to an off-shore entity, many of which are more secure, and provide better advantages than their on-shore counterparts.
Most states also have laws that protect the owners of a corporation, limited partnership, or limited liability company from the liabilities of the entity, though this is not always a safe strategy, as a creditor can sometimes pierce the corporate veil and make an owner or officer liable for actions of the corporation. Many states limit the remedies of a creditor of a limited partner or a member in an LLC, thereby providing some protection for the assets of the entity from the creditors of a member, though again this is not a guaranteed protection.
All fifty U.S. states provide some protection for the assets of a trust against the creditors of the beneficiaries, depending upon the type of trust created. Some states allow asset protection for a self-settled trust (a trust in which the settlor or creator of the trust is included as a potential discretionary beneficiary) and some states do not.
Creditors have several tools to overcome the laws that provide asset protection. First, there are federal and state fraudulent transfer laws. Today there are two bodies of fraudulent transfer law: the Bankruptcy Code and state fraudulent transfer statutes. Most states have adopted the Uniform Fraudulent Transfer Act which defines what constitutes a fraudulent transfer. The UFTA and the Bankruptcy Code both provide that a transfer made by a debtor is fraudulent as to a creditor if the debtor made the transfer with the “actual intention to hinder, delay or defraud” any creditor of the debtor.
Asset protection planning requires a working knowledge of federal and state exemption laws, federal and state bankruptcy laws, federal and state tax laws, the comparative laws of many jurisdictions (onshore and offshore), choice of law principals, in addition to the laws of trusts, estates, corporations and business entities.
Put the extensive experience of Charles J. Lybarger to work for you. Call 702-340-2335 to get started.
The process of asset protection planning involves assessing the facts, circumstances, and objectives of an individual, evaluating the pros and cons of the various options, designing a structure that is most likely to accomplish all the objectives of the individual (including asset protection objectives), preparing legal documents to carry out the plan, and ensuring that the various legal entities are operated properly in accordance with the laws and the objectives of the individual.
Choice of law rules in the United States make it possible for a person from any state to create a trust, corporation, limited partnership or limited liability company that is governed by the laws of any other state or jurisdiction. Because of this ability to “forum shop,” various states and other jurisdictions have modified their laws to allow greater asset protection in order to make them competitive with other jurisdictions.
In most states, the assets of a self-settled trust are not protected from the creditors of the settlor. In 1997, the State of Alaska passed a statute which provided that the assets of an Alaska self-settled trust are not subject to the creditors of the settlor. Since 1997, the following states have adopted legislation allowing for a self-settled asset protection trust: Nevada, Delaware, South Dakota, Wyoming, Tennessee, Utah, Oklahoma, Colorado, Missouri, Rhode Island and New Hampshire.
Yes! We do make house calls.