Will Your Asset Protection Strategy Survive The Final Judgment?
Did you know that... we live in a lawsuit-crazy society? I'll
bet you do know that. And I bet you also know that court
judgments are getting more and more outrageous all the time.
Unless you have some sort of asset protection strategy already
set up, whatever assets you have built up can be wiped out from
a lawsuit that does not go your way.
Asset protection is a means for protecting your valuables from
future lawsuits and creditor collection attempts. While many
people are looking for a solid way to do this, there are many
ways where the asset protection options that they try are not
going to work.
But, there are asset protection strategies that really do work.
What you want to do is to search out the right ones and use them
effectively. Asset protection, or more precisely having an asset
protection strategy, is something that many more people should
take advantage of. What I plan to do in this article is to help
you not take the wrong path n your asset protection strategy.
The first thing to do is to have your asset protection strategy
in place before you get involved in a lawsuit. I know, how do
you know if and/or when you are going to be involved in a
lawsuit? You don't. But,you don't want to wait until you are
being sued.
If you are involved in a lawsuit and a judgment is placed
against you, don't try to "sell" everything to your spouse or
cousin or business partner for something like $1. If you start
to arrange your assets to avoid them being taken after the fact
of a court judgment, then that is like "closing the barn door
after the horses have escaped". It is too late. That would be
deemed illegal and is known as a "fraudulent transfer".
The court will recognize the transfer for what it is, an asset
protection trick to try to keep your assets out of the hands of
your creditors. The "sale" would be reversed by the court and
the assets would have to be given to the creditor anyway.
By the way, there are also other things to be wary of when
involving a spouse, another family member or relative or even a
business associate in an asset protection scheme.
If it is found that your scheme was in violation of the
Fraudulent Transfer Act then you could not only lose the assets
that you were trying to protect, but there is the additional
money the you would lose in court costs, attorney fees and the
costs involved in collecting the debt. Also, your "accomplice"
could have a judgment entered against him or her.
Another thing to keep in mind is that if you involve another
person in your asset protection strategy by "selling" them your
assets for a few dollars, the assets would legally belong to the
other person and they would be able to do what they want with
those assets.
It has occurred only too often that the new recipient of the
assets has turned around and handled the assets in a manner that
benefits them, leaving the original owner with nothing. Even
though you trust somebody today, you never know what will happen
in the future. So, in this case we can say, "Let the seller
beware!"
One more point about "getting rid" of your assets through sale
to your spouse: In the United States, if you live in a
"community property" state then everything that is owned by you
during the time of the marriage is also owned by your spouse and
vice-versa.
So, transferring ownership to a spouse in a "community property"
state does not help your asset protection strategy and does not
protect you from creditors. The current community property
states are: Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington and Wisconsin.
One asset protection strategy that does work and has been known
to work very well is offshore asset protection trust or APT.
Here the assets are protected from lawsuits because they are in
oversea territories and therefore untouchable in most cases. Of
course, it is important to take note of applicable fraudulent
transfer rules as well. As in most asset protection strategies,
timing is very important.
Another asset protection strategy that has been shown to be very
successful is offshore incorporation and offshore bank accounts.
There are many benefits for incorporating offshore. Legally
limiting the amount of taxes you pay on your income, and
protecting your business against lawsuits are just a few of the
ways an offshore corporation or IBC can benefit your asset
protection efforts.
Forming an offshore corporation need not be any more expensive
or time consuming than forming a corporation within your own
country. Be sure to use a legitimate and established firm when
setting up your IBC. Make sure your asset protection needs are
being handled in the way you want and that you get answers to
all your questions.
Keeping with the asset protection theme of protecting your
wealth from lawsuits, the offshore bank account will also help
address this issue. Most companies that offer offshore
incorporation will also help you set up an offshore bank account.
It would be a good idea to keep the account in non-US funds. The
accounts are usually offered with an international debit card,
so you can access your funds from an ATM wherever you have
access to one.
In conclusion... Laws are different from country to country,
and from state to state. You need to get professional advice
from a competent financial advisor as the first move.
Do not wait until you are already in financial trouble because
then it would be too late. If you transfer assets in order to
put them out of reach of your creditors at that time, it may be
seen as fraudulent and illegal. You need to have an asset
protection strategy in place before you are sued, and before
anyone tries to take your assets away.
It is never too early to get a plan in place. Just remember the
old expression, "If you fail to plan, you plan to fail." Do it
NOW!