Asset protection facts — what you should know

By Ike Devji

PRO ASSET PROTECTION


What is asset protection?
Asset protection is a proactive, holistic system of legal and financial tools and strategies that preserve wealth and assets in all forms from loss, waste or spoilage. It also accurately analogized as net worth insurance.

Is it Legal?
Absolutely, if done at the right time by a professional and in a tax neutral way. Asset protection planning in and of itself, if done at the right time, is a valid legal purpose on its own. Many of the tools and strategies used in asset protection also have legitimate business purposes for other reasons like tax efficiency, investment management consolidation, wealth transfer and estate tax avoidance to name just a few.

Am I wealthy enough to do asset protection?
Probably, there are good strategies available at nearly every income and net worth level. The number one mistake made by lawyers, CPAs and financial advisors when advising clients if they need asset protection is telling them they are “not rich enough” to worry about it. That is terrible advice. While most of our clients are seven to nine figures in net worth, we also have a large group that is on their way to accumulating significant wealth. What all these clients have in common is that they have worked hard to accumulate what they have, regardless of the total dollar value. If the loss of all or most of your current assets would pose a significant threat to your family, business and way of life, you should probably examine the options available to you.

Will it get me in trouble with the IRS?
Not if it’s done the right way. The tools and strategies we use to protect thousands of clients are tax neutral and require full compliance and tax reporting. We never want to see your planning jeopardized because you are in harm’s way with the IRS. None of the plans involve “secrecy” or “hiding” assets. Those amateur plans often assume that you will commit perjury and are based on the “hope” that you can hide something and that the courts won’t find it or ask about it. Hope is not a plan.

I already have a Revocable Living Trust (RLT), isn’t that asset protection?
No, if that’s the case you have great estate planning, an important and necessary part of any good system. However, an RLT provides absolutely no protection against judgments, lawsuits and a hostile world. The first word is “revocable” so the courts will simply order that you revoke the trust and hand over the house, investments and other assets it holds. An RLT is death planning, as opposed to asset protection which is life planning.

Can I wait to do it until I really need it?
No. The number one flaw in most asset protection plans is timing. Most people wait until they have an exposure to take simple steps that could have protected a lifetime of effort. Trying to gift, move or hide assets after you have an exposure is fraud. In fact there is a specific name for it, fraudulent conveyance.

Transfers you make under this harsh light can be set aside completely and create a hostile situation with the courts. The best time to act is always now, and every day that passes makes the planning you do a little stronger. Just like with insurance, you can’t insure yourself against an event or loss that has already occurred, only against future exposures.

What can be protected?
Almost everything. A partial list of the assets that can be protected would include:
Investments like cash stocks, bonds and etc.
Residences
Investment real estate
Interests in businesses
Valuable personal property like art and jewelry collections
Business equipment
Future income
Cash value of life insurance policies

Do I lose control of my assets?
No, most of our tools allow direct control by the client or someone the client wants in control, until and unless it is more efficient or safer for the client to delegate management to a fiduciary like a trustee. You will decide when and if that happens.

Are your asset protection tools international (offshore) or domestic?
We use a system that incorporates both kinds of tools, but primarily domestic ones. What specific tools we prescribe to any individual client depend on a variety of factors including the nature of the assets they have, their value and the threats the clients faces. Every plan, like every client, is unique.

Can my lawyer do this?
Probably not. The upper level tools and strategies we use to protect thousands of clients and billions of dollars in assets are unique and special tailored to this purpose. If your planner was aware of these tools and risks, and was informed about your risks and the options available to you, it would already have been done and you would not be reading this. There are many potential planning pitfalls that lawyers who work primarily in other areas are simply not aware of and now matter how smart your counsel is they can’t be an expert at everything. Asset protection is the sole focus of our legal practice.

How Do I start?
Just call and we will set a mutually convenient time to talk on the phone or in person. We will ask you a series of questions covered by attorney-client privilege that will allow us to get a real idea of the risks you face and what needs to be done to address them. You don’t need to do any “homework” before the call and most of the people we talk to can provide us enough detail to create a good plan. We will create a specific written plan of action and also provide you a very specific fee quote that will allow you to see how a small investment can protect a lifetime of hard work.