Asset Protection: A Life Necessity

Overview: If you are a businessperson, professional, corporate director, or other person of moderate to high net worth, then you likely deal with the public and have customers.Consequently, you remain exposed to the risk of being sued, frivolously or not, on a daily basis.The goal is to reduce that exposure and minimise the chance of legal action over the long term in order to protect those assets for your future and for your family.

-Protect against lawsuit exposure.

-Protect against future creditors.

-Reduce financial profile thereby increasing your privacy

-Protect anticipated inheritance.

-Avoid probate.

-Avoid or supplement a prenuptial agreement.

-Protect your property against a divorce claim.

-Replace, reduce or supplement liability insurance including malpractice insurance.(Malpractice insurance will not usually cover an award for punitive damages).

-Coverage against uninsured risks, i.e., environmental hazards.

-Coverage against risk that your insurance company may not be able or is unwilling to satisfy a claim.

-Protect against forced probate laws, i.e., certain governments do not allow for free disposal of property upon death

With arrangements of The Guatemala Law Firm, ( www.guatemalalaw.org) involving Asset Protection as a goal, you maintain confidentiality over your transactions and keep your hard-earned wealth for the benefit of you and your family.

Why Have Asset Protection

We now have lawsuits being filed at the rate of one hundred million cases a year. Many of these suits have nothing to do with right and wrong, but instead, are predicated on the desire of one party to extract wealth from another party. In many cases, this equation is not predicated on the desire to extract real wealth instead, but on a desire to extract small payments as 'nuisance' settlements because it is cheaper to pay than to fight.If lawsuits continue at the pace they do today, each person in the 80% of wage earners in this country will ultimately be sued five times. One does not have to lose even one of these cases in order to lose their wealth; simply the cost of litigating these issues can be onerous enough. If we assume that one is lucky enough to make it through the legal maze without becoming a target, then at time of death the federal government under today's law would take roughly 50% of a familys wealth as the transfer is made from mother and father to children of all amounts over $1.2 million.(US Gift and Estate Tax Laws) Several bills have proposed even more onerous taxation.If you have attempted to pursue the American dream of wealth, of independence, have the ability to control your life, you may very well be disappointed by these numbers. In fact, you may be frightened. For many people the threshold issue in asset protection is: do I need it?Many people believe this won't happen to me, it can't happen to my business, my family is safe, because we don't anything that's dangerous. The reality of life in America is that you don't have to do anything dangerous; all you really have to do is be in the wrong place at the wrong time. Ordinary people have extraordinary problems. In many cases these problems are not problems of their own doing, they were simply matters of circumstance.

Imagine a group of business partners getting together for an informal lunch to discuss their work, one of the secretarial staff in the office is asked to go to a local restaurant and pick up an order for these partners. Unbeknownst to the partners as part of her normal work environment, this party has a poor driving record, several accidents and speeding are the main cause of these problems. The secretary leaves the building, climbs into their car, and proceeds to pick up lunch. In the midst of this trip excessive speed is taken by the employee. The employee pays more attention to the radio than to an upcoming stop sign. The stop sign is run, a car is smashed, a life is lost. A subsequent lawsuit, one would think, would simply blame the employee for her negligence, but unfortunately this is not the case.

All of the partners are sued as the result of their negligence in not determining that this driver was in fact unsafe. More importantly, this driver was on company business, and the heirs of the life that was lost now seek retribution from the remaining partners. Their homes, their college funds, their boats, their vacation homes, even their business are up for grabs.

In a subsequent lawsuit, several hundred thousand dollars are spent attempting to defend this suit. Unfortunately, this case is not settled because the main suing party, one of the remaining family, continues to expect more money to be found, more wealth to be uncovered. In many cases one of the prime financial elements that is being sought is insurance. In days gone by, insurance was a protector of the family and the business.Nowadays it often acts as a target.

A man working for himself acquiring properties, managing them, providing housing for many people, finds himself the subject of a lawsuit. The lawsuit is brought by what are known as squatters. Persons who have entered property that is vacant, set up households, and are living rent free in houses with no electricity, no water, none of the creature comforts most of us would require in real estate. These persons actually constitute a family and have small children. These small children eat the paint coming off the walls in this property, they suffer damage. This squatting family now brings suit against the home owner, and he must defend himself in court against this squatter suit. How unfair can it be for someone to enter your property without your knowledge and without your permission, do damage to their children through their own negligence, and turn around and attempt to sue you. To what degree can the system be unfair.These are simply examples of what we call extraordinary problems for ordinary people. The days are gone when simply the rich and powerful are the subject of lawsuit. The days are gone when right or wrong truly become the litmus test by which a suit is either filed or dismissed. It is imperative that families and businesses today understand that they are at risk and that problems can ensue.

Only Comprehensive Planning Will Succeed

There are several options that people are faced with in providing an asset protection plan. Some of them are good, some of them are not.One of the unfortunate options that people many times opt for is to lie and to misrepresent. Let it be known without any doubt that plans of this nature simply will not work. It will not work for many reasons. First, the question of telling untruths in a court action is obviously one that can have severe ramifications. People go to jail for perjury, fines are imposed, careers are ruined. It is absolutely critical to understanding the way asset protection works for people to understand that they must be compelled to tell the truth to the court, and only by telling the truth can they succeed.It is critical to understand that by being truthful and by not making your plan vulnerable, you serve your business, you serve your family, you serve all parties involved with a truthful and bullet proof arrangement.It is also true that in a comprehensive plan the protection that is given to a well thought out devised plan comes from the fact that other benefits are garnered. This is the unique and ironic point, for when you consider the fact that the way to protect is to avail yourself of other benefits available under law which in effect becomes simply saving money and creating predictability and safety in your life. Then the downside to such actions does not look severe, in fact it looks highly attractive.One must imagine how disappointing it must be for a doctor to take the base of his wealth and in fear of lawsuit for the entire asset base of this position to be transferred to a wife and to children, and ultimately for this transaction to be unwound because the court examines this transfer and detects badges of fraud.

Now in this particular case, this sort of planning has been done for years and years by physicians of all sorts. Unfortunately the plan is not comprehensive. It does not supply these other benefits, it does not supply the kind of reasoning that the court wants to see in judging this plan as a non- fraudulent transfer.

In many cases, those persons that have fraudulently transferred are normal everyday business people, lawyers, accountants, those people who you would think would be aware of this. Most lawyers are painfully unaware of how asset protection works. Almost all accountants are, as well as financial planners and other trained financial practitioners.The answer to this problem is relatively simple. If one were to have an appendectomy, one would desire a trained professional. When something as simple as a tune up on a car is done, most people turn to a professional.When tax forms are filed the average citizen retains the services of a trained professional. There is no difference philosophically speaking in these endeavors and the formation of an asset protection plan. Now, the problem with this equation is that one will immediately assume that the place to go to find professional help is in an attorney's office, and in many cases this is absolutely not true.

Trained professionals in asset protection can come from many different areas. They can come from the accounting field, they can come from the investment advisory field, they can come from the life insurance field, they can come from the legal field. However, it is absolutely clear that most people need a comprehensive plan.

There are many people today who are promoting themselves as asset protection experts and yet what they do is to provide a simple type of solution to a very complex problem. For example, there are numerous seminars around the country promoting the use of family limited partnerships. Family limited partnerships are an excellent, tool for asset protection (as of 1999, under attack by the IRS and US Courts) .However, if used in a vacuum, and if used in a strictly particular sense, this plan can fail, and in many cases does, due to the inability of a court to look at this transaction and not label it a sham.Unfortunately this will come at the worst possible time for the person attempting to protect their assets and will result in forfeiture or confiscation. Attorneys are certainly adept at the drafting of these plans but a more well rounded organization is necessary for the proper implementation of such plans.

A decade or two ago, tax haven countries were used primarily by wealthy families setting up trusts for the grandchildren. But today many countries and structures are being used to provide asset protection for almost anyone and Guatemala is an excellent solution.

Published in Sections: Asset Protection ::