As the economy rises and falls, high net-worth individuals are at greater risk of losing what they have worked so hard to obtain. For those high net-worth individuals it is essential for them to seek expert advice and develop an asset protection plan. Thankfully, Jeffrey Matsen and his firm, Matsen Voorhees Mintz have the experience and know how to develop an asset protection plan that works specifically for you.
We have all heard the old gambling adage “If you want to be a winner, you have to walk away from the table a winner.” This is exactly what asset protection planning is all about. While asset protection is typically reserved for people at a high risk of being sued (like surgeons or real estate investors) more and more people are seeking the peace of mind asset protection can provide.
Like many areas of creditor debtor law, asset protection is extremely complicated and needs to be dealt with in a careful and deliberate manner. Below we will address 10 tips to keep in mind when building an asset protection plan with an expert.
1. Start Planning Before A Claim
By planning ahead before a claim is made, there are many things you can do to effectively protect your assets. However, once a claim or liability arises, there are limited solutions and anything you may do can be undone by “ fraudulent transfer” law. Do not wait for a demand letter or process server to show up. Protect your assets by staying ahead.
2. Late Planning Tends To Backfire
After a claim arises, asset protection planning can make matters worse. There’s a common misconception that a judge can only unwind a fraudulent transfer and leave a debtor who tried late planning no worse off. On the contrary, both the person who assisted the debtor and the debtor himself can become liable for the attorneys’ fees.
3. Planning Isn’t a Substitute for Insurance
Planning shouldn’t be a substitute for insurance. In fact, it should supplement insurance. It’s a very common myth that asset protection plans can scare away plaintiffs, and a protection plan doesn’t pay any legal fees to defend you against a lawsuit. However, insurance can supplement an asset protection plan, allowing the debtor to survive a fraudulent transfer claim. In case you get sued, you may ask the insurance company to pay to settle and defend the lawsuit. After all, this is what you are paying premiums for.
4. Business Assets are Meant for Businesses, and Personal Assets are Meant for Trusts
Business entities are considered vehicles for commercial operations. They aren’t personal savings bank accounts. Personal assets should always be placed in a trust. A body of law protects personal and trust assets. Business assets should only be used for business operations.
5. Too Much Control May Be A Bad Thing
Asset protection planning aims to reach a balance between giving a person sufficient control and freedom. This is to make sure the assets don’t just diminish in value. However, there should not be so much control that the creditor argues about the debtor and protection structure being one and the same.
6. Tax & Estate Planning and Asset Protection Planning Don’t Always Mix
At times, asset-protection planning, estate planning, or tax planning may work together. But there are times when they don’t work well with each other. For example, what may work perfect for estate planning may not be the best solution for asset protection or tax planning. Thus, estate planning with asset planning may not be a very good idea.
7. The Money May Be Off-Shore, But Not You
As per the Repatriation Orders, debtors are required to bring back their money to the United States. In case the debtor doesn’t comply with this order, the court may even issue a bench warrant and hold the debtor in contempt until the money comes back. Thus, the debtor may be imprisoned.
8. Bankruptcy Isn’t Always the Last Refuge
Until a few years ago, bankruptcy was a viable solution for many. This isn’t the case anymore. Bankruptcy laws were changed in 2005. Now, state homestead exemptions are limited, and many new provisions in the law can make asset protection planning very difficult.
9. It Won’t Work If You Can’t Explain
It is common for many asset protection plans to become complicated. In some cases, even the client is unable to explain how the assets are held or transferred. Such queries can be expected in a debtor’s examination or depositions. It’s important to understand everything about your assets, and make sure you’re able to explain everything to a judge. Otherwise, this lack of knowledge can work against you.
10. Secrecy is Just an Illusion
It’s important to understand that creditors will always know about asset protection planning. Plans requiring secrecy often face a lot of challenges and problems. You shouldn’t even consider bankruptcy before making a full disclosure.
Contact us to schedule a consultation: 714.384.6552