Asset Protection Attorneys

Many people think that only those who have significant wealth need the help of an asset protection attorney. Young entrepreneurs seeking protection for their assets against the risk of their next business venture, retirees requiring asset protection, wealthy business people seeking ways to shield their assets from lawsuits, and professionals with a high degree of liability can use the advice of a lawyer. Asset protection attorneys have knowledge and experience in establishing limited partnerships, Limited Liability Companies, and trusts. They can help organize investments in a way to provide maximum protection.

You can legally protect your assets from lawsuits, collection agencies, and the IRS. The Revised Uniform Limited Partnership Act (RULPA) states that the assets owned by a limited partnership firm are not owned by the individual partners. Creditors of an individual partner cannot claim those partnership assets. Limited partnership logic can be applied to a family business in which the partners are family members Family assets can be placed into a limited partnership to protect them from creditors because of the RULPA

Asset protection attorneys can recommend appropriate asset protection methods for doctors and other professionals. Health care professionals are at risk for medical malpractice lawsuits, Medicare and Medicaid audits and lawsuits, and medical insurers’ lawsuits, all of which are potentially serious threats to their practice and personal assets. Asset protection attorneys determine the best strategy to discourage the lawsuits. Offshore asset protection can provide maximum protection against all types of claims.

To set up an offshore asset protection trust an asset protection attorney can provide advice on the laws of the offshore country. Lawyers can provide advice on new laws to maximize asset protection.

Many people make money, but only a few know how to protect it. Asset protection attorneys are aware of the best strategies for shielding assets so you can sleep peacefully every night. Advanced planning is the key to success in asset protection. Asset protection works like insurance; buy it before you need it.

Establishing an irrevocable trust that consists of a special power of appointment is a safer, more reliable, and more confidential way to protect your assets. The properties that are subject to special power of appointment are exempted from your creditor’s claims, judgment collection, divorce, Medicaid eligibility, bankruptcy, and estate tax. There are many types of irrevocable trusts, such as a credit shelter trust, charitable remainder trust, generation trust, and qualified personal residence trust. An attorney can help you understand and choose the best irrevocable trusts. There are many complex tax rules that are part of irrevocable trust formation. It is important to understand them before setting up a trust asset protection attorneys can provide critical advice.

Asset protection attorneys offer assistance in domestic equity stripping and offshore equity stripping. Although homestead exemption laws offer some protection to your residential property it is not advisable to rely entirely on these laws.

Asset Protection Scams and Schemes

Consumers must be aware of asset protection scams which can result in fines or a jail term in some cases. Avoid planners who claim that they are capable of reducing or eliminating your tax liability. Every person who earns income must file an income tax return. Not reporting income is fraud. If your asset protection plan includes underreporting or not reporting income to the government there could be serious legal consequences.

Asset protection scams include:

Corporate Sole Scams

a corporate sole scam is a legal entity consisting of a single incorporated office, occupied by a single man or woman. A corporate sole is touted by some promoters as a method of asset protection and tax elimination. The truth is that if a person who is controlling a corporation is sued they may lose control of the corporation and its assets. Personal protection from a lawsuit is available if the liability takes place against the company. A corporation sole, like any corporation, must declare its income. The money paid by a corporate sole must be reported to the Internal Revenue Service as income.

Pure Trust Scams

This type of trust is also known as a Constitutional Trust or a Common Law Trust. This is the most common asset protection scam. The IRS has warned taxpayers against these fraudulent schemes in which claim bogus tax advantages.

Consultant Scam

 This scheme is also referred to as the pyramid scheme. Individuals pay a large sum of money for a weekend class to be certified as asset protection consultants, however the professional designation is not recognized by the IRS.

Purchase: Four Tips for Asset Protection When Buying a Business

Buying a business is not for the faint of heart because it requires a great deal diligence. In a business purchase it is possible to lose the entire investment. The purchaser may be liable for debts of the previous owner including unpaid taxes. Here are some business purchase strategies:

Due Diligence

Imminent or pending litigation might not be made known by the vendor. This happened to me and is one of the reasons why I went bankrupt. Disclosure is required by the seller in most business purchases. If the seller does not fully disclose the pending litigation, you may be held responsible for the liability. It may be possible to sue the seller, in the event that the seller defaults on this obligation. An ounce of prevention can be worth a pound of cure. Research the business thoroughly before committing to a purchase.

Hire the Right Professionals

Due diligence is the purchaser’s burden. The purchaser must be in the driver’s seat, even with the best accountants, the best consulting firms, and the best attorneys. Professionals who take time to educate you and explain things are the ones to choose.

Insurance

Business liability insurance can protect against lawsuits for property damages, personal injury, etc.

Your Personal Liability

Avoiding personal guarantees in purchasing or owning a business is difficult. For a business, creditors will generally request a corporate guarantee as well as personal guarantee. Try to avoid this.

Asset Protection Through Offshore Banking

Offshore banking refers to the banking in countries other than your home country. Opening an offshore bank account offers tax advantages, asset protection, and confidentiality benefits. Offshore bank accounts are another effective asset protection option. It is advisable to open an offshore bank account in the Cayman’s or Channel Islands. Choosing secure offshore banks can offer the highest amount of stability and safety.

Offshore banks located on islands like the Cayman Islands and Channel Islands and Luxembourg serve as tax havens for many. Avoid Switzerland, as it signed new treaties with many countries and now discloses everything.

International trust agreement banking is the safest method of maintaining confidentiality in banking. This allows you to open multiple currency accounts. Most of these bank accounts offer anonymous debit cards that can be used to access funds at ATM machines. Offshore bank accounts opened in a jurisdiction that has favorable taxation and legislation can guarantee that income and interest earned on the account are tax-free.

Domestic bank accounts are susceptible to lawsuits while offshore banking provides an unrestricted environment of financial freedom and security. Moving assets to an offshore bank can help savings grow at a faster rate. Offshore banking also allows diversification of personal and corporate banking while providing an international business presence. It protects funds that would otherwise be lost in your home jurisdiction and lets you take advantage of increased banking possibilities. Offshore banking opens up new doors to financial products and services that may not be available in your home jurisdiction.

Look at many types of banking and see which is right for you. A personal bank account is the least protective type of bank account because the account will be in your name and the government can see your name in all international wires sent or received. You can provide a additional layers of security to your bank accounts by using an anonymous corporation, trust, or foundation for banking.

Though there are numerous advertisements online about foreign banks, you need not be confused about choosing a reputable offshore banking jurisdiction. Evaluate your bank based on privacy and customer service. The bank should have measures to protect privacy and calls must be answered by an officer familiar with your needs and in your language.

Be aware that recent regulation in the United States made it a Federal crime if you do not file a Report of Foreign Bank and Financial Accounts (FBAR) if you meet the following conditions:

United States persons are required to file an FBAR if:

  • The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  • The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
  • United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Business Entities for Asset Protection

If you want to start a business, the first thing you need to determine is the type of entity that best suits your needs. Sole Proprietorship, Partnership, Limited Liability Company, and Corporation are some of the common business entities, each with positive and negative attributes.

Sole Proprietorship offers flexibility and convenience but is not suitable for shielding personal and business assets. The owner of a sole proprietorship assumes all the risks of the enterprise and the creditors of the firm can pursue collection against business assets and personal wealth.

General Partnership is similar to a sole proprietorship. All partners are liable for the action of other partners. If you wish to start your business as a partnership firm, you can go for a limited liability partnership (LLP). A LLP limits the liability of each partner. A partner in an LLP cannot be held liable for acts of other partners. An LLP is a separate entity so there are some tax benefits as well. Doctors, lawyers, and other professionals prefer this type of entity to avoid liability

A Limited Liability Company is the best type of business entity for asset protection. Properly drafted, it protects members from the debts and liabilities of the company. This entity is formed by filing Articles of Association with the Secretary of State. An operating agreement controls the internal workings and the relationship between the organization and members. Benefits of running your business in this form of entity low cost to incorporate and flexibility in sharing profits and losses as members see fit. As it is a pass-through entity, double taxation can be avoided.

A Corporation is another type of business entity that offers great asset protection. It is owned by shareholders, who elect a board of directors to oversee and manage the business operations. The directors provide high level company direction. Creditors of the shareholders cannot access corporate assets. The shareholders, officers, and directors do not have any personal liability for the debts and obligations of the corporation.

An Offshore Corporation is another excellent option to safeguard personal and business assets. Choose a country that has strict asset protection laws. See Chapter Seven for further information.

Asset Protection for Business Owners

Asset protection is indispensable for every business owner. Earning wealth is important and protecting it is equally important. A comprehensive plan reduces or eliminates the risk of losing assets by keeping them away from creditors.

The first step in asset protection is determining what types of assets are at risk. A professional can help you understand how to use the asset exemptions allowed by Federal and State governments. Exempted assets are unaffected by legal judgments and the claims of creditors. Homestead property and tools of the trade are exempted in most US states.

Business owners need to take measures to protect business and personal assets. The organizational form in which the business operates plays an important role in determining asset protection. In a sole proprietorship the owner has unlimited personal liability, so it is advisable to avoid operating a business in this form. Limited partnerships are better than the general partnership form because the partners have limited liability. A Limited Liability Corporation is one of the best forms for asset protection. In many states the LLC protects the business interest of the company from the claims of the owners’ personal creditors, and owners’ assets are protected from claims against the company.

If you are interested in establishing a legal entity in another country, choose a jurisdiction that offers asset protection, ease of operation, flexibility, and tax advantages. Offshore company incorporation provides confidentiality for properties, bank accounts, and other assets.

In the corporate format, especially for small businesses, there is a risk that the names of shareholders, officers, and directors will be included in a lawsuit against the corporation. Plaintiff(s) will attempt to pierce the corporation’s limited liability protection. There may be judgments in which the courts disregard the legal protection of the corporation. Corporate principal shareholders and directors need to use a strong asset protection plan to protect personal assets. Consider using a Limited Liability Company to conduct your business. An LLC has more protection than a corporation and while the managing member might be named the other members cannot be named in a lawsuit.

An Example of a Good Asset Protection Strategy

Paul and Karen own a business and have hired a day laborer to trim trees for a client. The day laborer injured his arm and sued Paul and Karen. Luckily they previously had sought the help of asset protection professionals who recommended that they establish a limited liability company in Luxembourg. The professionals also advised Paul and Karen to establish a bank account in that country. The plaintiff therefore found few assets. They settled the dispute out of court and paid a small amount for minor medical costs.

Specially designed companies offer maximum asset protection from internal and external liabilities. If the liability is internal, creditors can be awarded assets of the company but not the assets of the members (shareholders). The limited liability veil protects the interest of the members. If the liability is external, arising from a lawsuit against any of the members for malpractice or negligence, the creditors may be awarded assets of the company. The creditors will however need to comply with a charging order or a court ordered interest in the assets; this is essentially a lien, which limits creditor’s rights to the distributions made by the company to the member.

To maximize asset protection offered by a company against external liabilities ensure that it has more than one member and that all members are not liable to the same creditor. Design the company carefully. For example, file the company in a jurisdiction that places rigorous limits on the charging order. In English law (the basis of U.S. law), a charging order is a court order in favor of the creditor for which the debtor must pay with interest and court costs. Some states in the U.S. allow the creditor to collect distributions from the company and to obtain a court order for all accounts, orders, and directions.

Another strategy is to include special provisions in the company’s operating agreement, including a provision to not assign ownership interests to others (including creditors) without the consent of the members and an agreement that provides that the company need not disclose any information to non-members. The operating agreement can be created to divide voting and control so that the members will be well protected from their creditors.

Asset Protection: The Iron Triangle

An Iron Triangle is an alternate method of asset protection, from real estate to even art. It is a complete solution which cannot be penetrated by lawsuits, IRS, or divorce courts. With an increase in the property value and an increase in lawsuits and divorce settlements, the triangle is an ideal solution for many income levels.

This system involves incorporating three entities: a “No Asset Corporation,” a Limited Liability Corporation (LLC), and a beneficiary-controlled trust.

A beneficiarycontrolled trust is a trust created by a person other than the beneficiary and requires another entity as a distribution trustee. The beneficiarycontrolled trust owns the assets. It also owns the company that executes the trust. The trust has the right to purchase property, pay for education and medical expenses, and other expenses as specified in the formation of the trust. If you are the beneficiary, you can control and remove the distribution trustee at any time.

The beneficiary trust owns 99 percent of the Limited Liability Corporation, which is responsible for paying your office expenses, travel, fuel, computers, and much more. The LLC should be the owner of office vehicles, computer printers, copiers, and other office assets. This is the entity from which one actually earns income from his or her assets. The Limited Liability asset is managed by the “No Asset Corporation,” which employs the beneficiary. The “No Asset Corporation” can pay the beneficiary’s life insurance, retirement benefits, and medical insurance. The “No Asset Corporation” owns nothing except a bank account and a check book. It is employed by the LLC as a manager.

As an employee of the “No Asset Corporation,” one is entitled to all business-related reimbursement such as travel, fuel, telephone, business entertainment, and more. Never reimburse personal expenses, as this will make you personally liable for any debts incurred by the company. The “No Asset Corporation” and the LLC work hand-in-hand to protect assets. These companies also give protection from loans collection, court cases, the IRS, divorce, and lawsuits.

Asset Protection Techniques

There are numerous techniques that can be utilized to protect your assets. The laws differ from state to state and country to country, so it is advisable to find out whether your properties can be taken from you under your state’s laws. Some states have homestead laws that protect your home from creditors. Property title can be transferred to friends or family members for protection, although this has some obvious risks.

Pension plans, insurance policies, and trusts can help protect your assets. Retirement plans are one of the best protections. For example, the U.S. Supreme Court Justices have ERISA plans that give protection against creditors. Though regular individual retirement accounts (IRAs) do not have any federal protection, they are protected by statute in some states.

Limited partnership can also offer protection for assets. Setting up a business as a family limited partnership firm or limited liability company can help protect personal assets from business-related lawsuits. Sole proprietors and basic partnership firm owners do not qualify for this type of asset protection.

Assets can be converted into homestead property or annuities that are creditor exempt. Assets can also utilize equity stripping, which allows you to place liens on assets so that when a creditor looks at your asset they will see it as property encumbered by a loan worth more than the asset itself. This makes it not desirable for the creditor to pursue that asset.

The Three Asset Protection Planning Methods

Asset protection planning may include establishing a series of trusts, offshore entities, or partnerships to hold legal title to your assets. Creditors will recognize that it is difficult or impossible to seize your assets after a judgment. A proper asset protection plan can cause the creditors to settle for a small percentage or not even pursue you at all. You can employ a series of legal techniques to deter a lawsuit and creditors.

Three Planning Methods: Divestiture, Exemption, and Shielding

The planning can work in three different ways. The first is divestiture, where an individual transfers assets to another person by liens or through outright transfer. This method of asset protection relies upon the fact that a creditor cannot claim what a debtor may possess while another party holds title.

The second method is by exemption planning, where assets are transferred to statutorily protected assets such as life insurance, an IRA, or residential homestead. This method varies from state to state.

The third method is shielding your assets through the use of liabilityprotecting entities such as companies and corporations.

There are different themes which are applied in shielding property:

Proper planning can provide absolute shielding from creditors and other claimants. The preparation can shield a person’s wealth from creditors and other claimants, but some property of the person will be exposed. The planning of property shielding can be made useful through layering other legal protections on the same wealth. The main goal of shielding is to frustrate all the creditors and their lawyers through changing the economic analysis of a lawsuit.

An Example of Asset Protection Planning

A reputable plastic surgeon in the United States was caught in some breast implant lawsuits that were actually the manufacturer’s fault. However, the manufacturer filed bankruptcy, so the plaintiff’s lawyers targeted the doctor. The doctor, through professionals, had already established a Luxembourg trust. He later filed bankruptcy and his assets were secure.

A good asset protection plan provides asset control while minimizing the risk of loss in the event of an adverse judgment. For instance, if you own several rental propertiesas well as residential propertyand you are worried about litigation, you can establish a land trust (a simple corporation) for each property. You can also establish limited liability companies to own the land trusts. Another company can also be established to place second mortgages against each property. In the event of a lawsuit for a tenant’s injury involving one of your properties, you would be protected.

According to the U.S. Census Bureau in 2009, nearly 258,000 civil lawsuits are filed every year. Most of them target middle and upper class Americans who have a net worth of less than one million dollars. An asset protection plan is not only important for the rich, but it is also important for middle- and upper-middle class citizens.