A lot of people look at asset protection planning and think there must be a catch or that there is something sinister, illegal or underhanded involved. We all believe that there is a moral obligation to pay our debts and live up to our promises. Many people suspect that asset protection planning is somehow immoral because it could prevent a creditor from collecting on a judgment entered by a court.
In the United States our justice system, as good as it is, is very unpredictable. Innocent folks get sued and face ever-expanding theories of liability. People get sued just because it looks like they have “deep pockets.” Judgments are taken against people because a court thinks it ought to be that way rather than based on the law.
You may ask, are there legal and ethical ways to protect your hard-earned assets from creditors, predators, “creative lawyers” and their lawsuits?
What is Planning to Protect Your Assets?
Other than purchasing sufficient insurance to protect against liability, the first step in asset protection is to understand that planning to preserve and secure your property in advance of a claim or threats from a “creative lawyer,” is completely legal and legitimate. Generally we think there are four goals for asset protection:
- Create an incentive for creditors to settle a claim;
- Improve your bargaining position;
- Create options for you when a claim is brought;
- In the best of all worlds, deterring your creditors from filing that “creative lawyer” lawsuit.
What Protection is Not!
Asset protection planning is never about avoiding taxes. Asset protection planning is never about keeping secrets. Asset protection planning never hides assets or defrauds creditors. Asset protection planning just will not work if the claim already exists. Therefore, asset protection planning has to be done long before there is even a hint of a claim.
When Done in the Light of Day, Protecting Your Assets Through Planning is Completely Legal and Ethical
The Rules of Professional Conduct govern attorney standards of service. Attorneys should advise clients of all the available tools to help their clients protect their hard-earned assets from frivolous and illegitimate claims. This is simply required by the attorney’s obligation to pursue the representation of their clients with diligence and advocacy. However, the Rules of Professional Conduct never allow an attorney to assist or counsel a client in committing or advancing fraudulent or criminal conduct. Please be aware that any attorney who offers to assist you in protecting your property subsequent to a lawsuit being filed is likely acting unethically. If the attorney would defraud another creditor, he or she would certainly defraud you. This type of conduct is neither ethical nor legal.
The Final Fact About Asset Protection Planning
You can drive carefully and stay away from barroom brawls. Unfortunately, you cannot always avoid all activities that could create liability. Remember, there are always “creative attorneys” out there looking to sue folks with “deep pockets.” Creating a plan to preserve and protect your assets in advance of a claim is completely acceptable, and more importantly, a legal form of wealth planning. I have experience in helping clients design and implement asset protection plans that are custom tailored to each client’s family situation and financial status. Please call Doug Thesenvitz if you have any questions about this type of planning and get started on protecting your assets from future creditors, predators, “creative lawyers” and lawsuits.