Litigiousness has exploded in our society in recent years. Commensurately, the need for adequate asset protection is more prevalent than
ever. The sluggish economy of late has made the litigation problem even worse. Law schools continue to pump out more freshly-minted
attorneys than the marketplace can realistically absorb. The more desperate among them (out of ignorance or unscrupulousness) fuel the
flames of litigation. Bearing the "Esq." moniker and being viewed as experts by their clients, some inspire toward litigiousness by building
unreasonable expectations in their clients as to the potential outcome of litigation. As a result, spurious litigation spirals out of control.
Defense counsel and insurers sometimes refer to this phenomenon as the "litigation lottery".
By no means are the new generation of John D. Rockefellers and J. Pierpont Morgans the only individuals with litigation targets on their
backs. While successful professionals are frequent targets of frivolous lawsuits, really anyone with a material degree of wealth is a potential
target. "materiality" as used above, can be a very small net worth as the middle class evaporates.
For someone seeking asset protection advice, there is no shortage of hawkers and pettifoggers (lawyers and non-lawyers alike) pedaling
books and fungible (commoditized) canned 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 resulting from a 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
The subject of asset protection, historically considered a remote 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.
That threat exists for the client and attorney alike. 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 sometimes referred to as a liability tail. The law generally allows a person to sue a
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. A voluntary or involuntary bankruptcy may require looking to federal law and portend a completely different result.