Like lawlessness, litigiousness has exploded in our society in the past few years and, commensurately, the need for asset protection as well. The sluggish economy of late has further exacerbated the problem. While professionals are frequent targets of frivolous lawsuits, really anyone with a measurable degree of wealth is a potential target. For someone seeking asset protection advice, there is no shortage of hawkers, lawyers and non-lawyers alike, pedaling books and fungible (commoditized) asset protection programs and packages as panacea. The first thing to know about asset protection is that trying to absorb and draw guidance from the flood of books and literature out there is not the solution, and neither is buying into a one size fits all approach. Common sense tells us that every scenario is factually specific and distinguishable from the next and, thus, rightly deserves a thoughtful custom solution. As a practical matter planning errors occasioned by an non-methodical asset protection plan can be costly, in some instances literally wiping out inheritances and/or a lifetime of savings derived from hard work and even subjecting judgment debtors to possible criminal sanctions. The second thing to know is that the explosive growth in the asset protection area has attracted attorneys, accountants and others who have little experience in the core areas underpinning asset protection. What a good asset protection attorney must possess is experience and knowledge in the core areas of business transaction planning, tax and estate planning law and debtor-creditor law. Kopman Law Advisors has been advising clients in asset protection matters for many years. We encourage you to read on and to contact us should you have any questions. The subject of asset protection, historically considered an appendage of estate planning, has been expanded considerably in recent years so as to warrant being labeled a separate and independent practice discipline. In its most simplistic form, asset protection planning involves the lawful structuring of affairs, the objective of which is to preserve wealth, particularly in advance of a client being faced with litigation, legal claims or assessments. The key to successful asset protection planning lies in its timing. More specifically, if one has left commencement of the process until after litigation has been asserted or even threatened, it may well be too late for asset protection strategies to be operative. Fraudulent conveyance laws, among other legal prescriptions, can have the effect of unwinding of asset protection transactions and leaving assets exposed to creditor claims. There is also the specter of criminal sanctions for untimely transactions under the moniker of asset protection. Caution must be used at all times, and sound advice is a legal imperative. Kopman Law can assist clients with the foresight to entertain asset planning on a timely basis by creating entity structures, including trusts and business entities, using domestic and offshore strategies or some combination of the two. The firm can assist in establishing business and fiduciary relationships in traditional safe-harbour and financial havens including the Channel Islands (Jersey, Guernsey, Isle of Man, etc.), Cook Islands, Nevis, Providenciales, Cayman Islands, Bahamas, Bermuda, Turks and Caicos, Lichtenstein, Panama, and Luxembourg. Thus, no one plan will likely resemble another as the outcome is determinative upon such factors as a client's domicile, net worth, fiscal circumstances and importantly, risk tolerance. Some of the entity techniques we employ are:
For most of us, it’s not easy to accumulate assets. In the common case, asset accumulation is the result of many years of hard work, while saving and investing what we can for the “future.” The prospect, whether real or remote, of losing it all on account of a mishap, a mistake in judgment, or a bad business deal often leads us to seek ways to protect these assets. But just how is that done? Must you give your assets away? Or put everything in trust? What kinds of trusts will work? Asset protection planning has developed into a sub-specialty in the law. Experienced asset protection attorneys will tell you that methods of protecting assets can range from a simple declaration of homestead to a complicated series of trusts and limited liability companies, depending upon your particular situation and possible exposure to liability. Which method or combination of methods to use depends on the planning attorney’s assessment of the exposure and the recommended plan. But not everyone needs asset protection planning, and those who do need it may not all need it to the same extent. For instance, a retired couple will normally have little exposure to liability other than through an automobile accident, and that exposure can be covered by adequate automobile and umbrella insurance. If, however, one or both members of the couple are retired from a profession, the practice of which exposed them to liability (e.g., physicians, dentists, attorneys, accountants, etc.) then exposure to claims from their practice will continue on for many years after retirement. This is because the law generally allows a person to sue the professional within a period of time after he discovered the problem, even though it may be the result of an act that occurred many years ago. Most professionals are aware of this and will purchase a malpractice insurance “tail” to cover them for such post-retirement claims. To the extent the coverage of the tail is insufficient, then, of course, they would need to consider planning to protect their assets. Contrast the retired, non-professional couple with an active working couple, or individual, in a business or profession that exposes them to liability on a daily basis. People in this situation, as well as those in between, would be well advised to have their situation reviewed by an asset protection planning attorney to determine which, if any, planning steps are advisable. As mentioned earlier, securing protection, to varying degrees, may be as simple as a declaration of homestead on your principal residence, changing title to a tenancy by the entirety (for married couples only), or transferring your income-producing real estate to one or more limited liability companies. On the other hand, the plan may involve establishing one or more irrevocable (local) trusts, under which your benefits (but not those of your family) are limited, or even trusts in other jurisdictions, where your benefits need not be limited. Again, the specific recommendations would be provided by the planning attorney after a review of your specific situation. Generally speaking, you are free to dispose of your assets in any manner you wish, and except as noted in the following comments, those transfers will be free from the reach of your future creditors. With that in mind, however, a critical consideration of all asset protection plans is whether there are any claims or potential claims against you that are “pending, threatened, or expected.” While such a situation exists, it will seriously affect (though it may not absolutely preclude) transfers of assets you make pursuant to an asset protection plan. Many people are under the mistaken impression that if no lawsuit has been filed, they are free to make transfers and such transferred assets will be protected (i.e., beyond the reach of the creditor). This is not the case. Such a transfer is likely to be deemed to be a “fraudulent transfer,” and under the law, a court may order the transfer rescinded or it may simply reach the transferred assets directly to satisfy the debt. But note that not all transfers made during the time a claim may be pending, threatened, or expected will automatically be considered fraudulent transfers. There are exceptions, and it is through these exceptions that an attorney with the necessary expertise can help you protect assets. |
Asset Protection Practice
1278 Glenneyre Street
Suite 402
Laguna Beach, CA 92651
Suite 402
Laguna Beach, CA 92651
LAW OFFICES OF DANIEL D. KOPMAN P.C.
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