Effective Asset Protection Requires a Comprehensive Approach
The main function of asset protection management is to protect your assets from legal danger. Keep in mind that the fundamental purpose of the legal tools used in protecting your assets in not to hide personal or business assets. It is also not meant to keep the Federal government from collecting income tax on the earnings of those assets.
Predatory lawyers will place a target on your wealth. The predatory lawyers’ primary weapon is to pursue you with lawsuits to take your assets. But protecting your assets can be a tricky thing. State and federal laws, insurance coverage, trusts, and limited liability companies can help to protect your assets in a different ways. However, they are generally ineffective unless used as part of a Fully Integrated Personal Asset Protection Plan (FIPAPP). But no one planning device or strategy can actively protect all of your assets effectively. That’s why it’s important to have a comprehensive approach when protecting your financial and other assets.
When planning for asset protection, it’s important not to hide assets. The details of your plan can affects how much you pay in taxes. Protect your vulnerable assets with our comprehensive plan. A Comprehensive plan generally includes an Asset Management Limited Partnership (AMLP), to keep them protected. No, matter your needs; each protection plan is modified to fit according to your assets and objectives. Our comprehensive FIPAPP were are developed by professionals specifically to preserve and protect your assets.
Contact us today for a no-obligation review of your assets and resources!
ASSET MANAGEMENT LIMITED PARTNERSHIP
Our Asset Management Limited Partnership (AMLP) program is an important tool to your asset and financial protection. This program is the central portion of a wealth preservation plan as a “holding company” for your resources. It helps to manage liquid assets. The AMLP also secures them your assets with a legal barrier. Liquid assets include cash, investments, and securities.
In creating legal defenses, the Asset Management Limited Partnership effectively limits a creditor’s ability to take or pursue your assets. This is because of “charging-order” protection laws. Charging-order laws, prevent a judgment-creditor from gaining control of your assets. These creditors’ remedies are limited to only a claim on distributions once they are paid out by the partnership. This leaves you in charge of how, when, or if distributions are made—not the creditors.
FOREIGN ASSET PROTECTION
Foreign Asset Protection Trusts
In 1984, the Cook Islands passed the International Trusts Act, banning the primary Asset Protection Trust from recognizing any remote jurisdictions. Numerous nations went with the same pattern, including Belize, Bahamas, Nevis, and Cayman Islands, making a few Foreign Asset Protection Trust choices. This new law means that a creditor must re-try the case in the island nation (a notoriously difficult process) in order to extract assets. Because there are no contingency fee attorneys permitted, creditors must pay expensive legal fees and other associated court costs up front. The loser of a case likely pays their own legal expenses as well as those of the winner.
In any case, the disadvantages of an offshore trust include higher setup and maintenance costs and a heavier paperwork burden of IRS filings and federal disclosures. A Settler must also be willing to relinquish control to a foreign trustee. This is not including that creditors must deal with the negative perception of illegality that comes with offshore accounts.
DOMESTIC ASSET PROTECTION
Domestic Asset Protection Trusts
Alaska passed its resource insurance trust statute in 1988. The Alaska legislature had determined that asset protection is a good public policy, Alaska and 15 additional states have found asset protection to be legal and a worthwhile measure to take Domestic asset protection trusts are designed to provide you with:
- lower maintenance costs,
- reduced tax filings,
- fewer federal disclosure forms to fill out, and
- a number of other benefits.
Article IV, Section 1 of the US Constitution states that a judgment in one state must be honored by all other states. This constitutional provision has been used, it’s become apparent that several times to break domestic trusts. This can cancels out the domestic trust’s effectiveness. At Weatherby, we work hard to make sure that you and your assets are protected no matter the challenges that US courts and judges place upon them.
LLC ASSET PROTECTION
Limited Liability Companies (LLC) are relatively new to the world of corporate entities. They were first introduced in the US in 1978, make a corporate structure that had the advantages of a partnership, without the drawback of twofold tax collection of the C corporation. LLCs carry the majority of benefits that S-Corp or C-Corps offer, confinements or double taxation policies. The purpose of the LLC is to essentially compartmentalize risky assets. Risky assets include land, rental properties, watercraft, and aircraft. The LLC can be used to separate the risky assets from safe assets held by the AMLP.
How Asset Protection Works
Asset protection cuts out all the reasons why a person and their attorney might work to sue you. While it’s a simple concept, it’s not so simple to pull off. The best way to use asset protection is to take legal steps to make yourself appear financially unattractive to potential predators. Today, advanced customers and organizers understand this—but the tricky part is making sure that in a court of law, a judge cannot find any links that sufficiently bind you to your assets. This becomes especially difficult when you don’t want to appear to have control of your assets, but still wish to have that control.
Asset protection is the thin line between you being able to use and control your assets and evidence of a sufficient lack of control viewed through the court’s eyes. Clients who have even moderate saved wealth have used asset protection to protect themselves from financial litigation and becoming preyed upon by money-hungry lawyers.
MYTHS ABOUT ASSET PROTECTION
Myth: Asset protection is ONLY for those with high total assets.
FALSE: A customer with total assets of $5 million won’t be so influenced by a $1 million claim judgment contrasted with a customer with $1 million total assets. The customer with the total assets of $5 million can pay the judgment and keep on living the life that he or she is acclimated to. On the other hand, a customer with $1 million in total assets who gets a $1 million judgment is truly bankrupt and the life of his or her family will change definitely.
Myth: On-shore arranging of finances is as solid as offshore arranging.
FALSE: Many organizers and states guarantee its Family Limited Partnership (FLP) situated in the United States give complete security. While these on-shore arrangements are viable to a specific level, they are not impenetrable. The most secure resource insurance incorporates financial arranging that is not subject to U.S. courts.
Myth: I will lose control of my cash with asset protection.
FALSE: While the legal planning and arranging may appear to be confusing to begin with, the net impact of a decent arrangement will leave the customer in the position of making the most use of their benefits.
Myth: The IRS will audit me when I execute asset protection.
FALSE: Using a qualified lawyer to establish an asset protection plan won’t make you more exposed to an IRS audit. In actuality, there are extra forms you might be required to fill out that will help the IRS understand that you have the asset protection appropriately and lawfully set up.
Myth: Asset protection can help me save on taxes.
FALSE: On the off chance that an asset protection planner guarantees they will save you taxes, be wary of their services. Tax planning and asset protection rarely go together. Tax neutral asset protection plans will help keep your audit risk neutral. Other plans from that attempt to avoid income taxes can raise your audit profile and increase future IRS scrutiny.
Myth: I am not a target for lawsuits.
FALSE: Lawsuits are rife in the United States. Did you know it’s less more likely you will to win a multi-million dollar claim than it is to win the lottery? With more than one legal advisor for each 292 U.S. citizens, the number of lawsuits in the US will continue to rise. Nobody is sheltered from being sued particularly if his or her total assets are over $250,000. At this level of total assets, you are wealthier than 99 percent of U.S. occupants and your high total assets are vulnerable to lawsuits.
Myth: Asset protection is not legal.
FALSE: If protected done correctly by a qualified attorney, asset protection is an effective lawful device that can shield clients you from future lawsuits. There is nothing unlawful or unethical in protecting some of your assets predators from the reach of future creditors or predatory attorneys. Furthermore, asset protection laws have now been embraced in 16 U.S. states. The financial press regularly advises readers of the benefits of asset protection planning.
Myth: A Family Limited Partnership or Corporation is complete protection.
FALSE: Many asset protection firms promise that a Family Limited Partnership (FLP) is all that is needed to achieve asset protection. Numerous organizations state that FLPs or Nevada Corporations are effective asset protection options. This may be because they do not have access to offshore planning, or don't have the mastery to complete a full offshore arrangement for you. As opposed to working with you on the best arrangement, they may simply offer a prepackaged plan. They may not fully understand the downside of only using one domestic asset protection tool instead of a Fully Integrated Personal Asset Protection Plan.
Myth: I should keep foreign bank accounts active.
FALSE: A foreign account is not required unless you really need to transfer resources offshore. The majority of the time, having a comprehensive Fully Integrated Personal Asset Protection Plan with an offshore planning part in place is sufficient to deter anyone from bringing a frivolous law suit against you. It will even give pause to those claims that have some real merit.
Myth: If my asset protection plan is triggered, I must immediately leave the country.
FALSE: In the event that asset protection planning is triggered requiring the use of an offshore account, only then does ownership of the money leave the country. You do not need to leave the United States. No illegal action is taking place that would require you to follow your money.
Myth: An Asset Protection Plan can be executed after I am being sued.
FALSE: Your best bet for asset protection needs to be set up before you’ve had any concern that a lawsuit is being filed. If you’ve been notified of a pending lawsuit against you, it may already be too late to get the best protection. It’s necessary to protect yourself before you’re targeted. However, every circumstance is different and we can sometimes help even after you’ve been targeted for a lawsuit. If you find yourself in this situation, contact an experienced attorney immediately for advice.
Myth: I can protect myself by transferring my assets to family members.
FALSE: Transferring the greater part of your resources to your family members, including your spouse, won't shield you from claims. In fact, this action often opens up a host of other legal issues. It makes your resources available for the liabilities of the family members you have involved. It also creates issues for estate planning; who really gets what and how much, or in the case of the division of assets, in a divorce separation transfers to the spouse will generally be gifts and not be included in the calculation of assets to be divided. Furthermore, these plans simply don’t work out most times. The courts can implement impose a Constructive Trust on the assets transferred and by doing so penetrate your familial defenses and claim the assets held by the family member.
WHO NEEDS ASSET PROTECTION
The United States is sue happy. Our legal system has evolved since the 1980s to create a hyper-litigious society that is focused on victimization and limited accountability. Today, the United States has more lawyers and files more lawsuits than any other country in the world. More than $300 billion is spent every year on litigation. Why is this? Our current legal system encourages plaintiffs to sue anyone who seems like they have money—and sue they will. Civil litigation has become a item source of profit to plaintiffs’ attorneys and plaintiffs extracted from looking to sue hardworking professionals, business owners, and employers.
Anyone with a net worth of over $500,000 needs asset protection, specifically healthcare professionals, business owners/employers, artists/entertainers, and professional athletes.
Those who should be concerned about potential targeted litigation:
Anyone who has a high net worth,
Anyone in a high liability profession such as:
- Healthcare Professionals;
- Business Owners / Employer;
- Artist and Entertainers;
- Professional Athletes.
Who has high visibility or trace ability;
Who has high collectability as a member of the community;
Who has Investment Real Estate;
Who serve on nonprofit boards or corporate boards;
Who is a celebrity or is well known; or
Who is perceived to have millions in liquid assets
Any one of these elements solely places a target on your back for litigation. Be proactive. Plan ahead to ensure your assets are protected from legal predators.
Estate Planning is Critical, but Won’t Protect Your Assets. The Revocable Living Trust (RLT) is a great tool that can help to avoid probate, minimize taxes on your estate, and provide a legacy for your family; however, it does not shelter you from any type of exposure to lawsuits. On the other hand, asset protection offers protection from litigation and will complement your estate planning. Basic Risk Management is Critical, but Insufficient Even if you’ve covered your bases with basic risk management measures such as insurance, these standard steps often fall short of being effective against total protection.
Weatherby helps to fully protect you with comprehensive teams that work hard to keep your personal assets out of reach of predators. We help protect your assets in the form of a net worth insurance that removes the financial incentive for plaintiffs to sue you.
Act Now - It’s difficult to fully protect your assets once you’ve been targeted for litigation. If you try to take action after the fact, it puts you at risk of fraudulent conveyance, which opens the door for a court to take back the assets you tried to protect. Act now before you have a target on you. Don’t wait to get sued before you attempt to protect yourself.