Asset Protection Plans
One of the unhappy facts of financial life in our
lawsuit-happy society is the increasing danger of being
sued. And if you should have the misfortune to wind up
on the receiving end of some courtroom debacle, it
could easily cost you your life savings.
One of the best ways to protect yourself against
such a calamity is to have professionals prepare an
asset protection plan in advance of any problems.
Doing so is not expensive, and provides a great
deal of assurance that you and your family will have
the benefit of the money you have built up through
years of work. Asset protection plans are a relatively
new area of law, prepared by lawyers who specialize in
protecting what you own instead of litigation.
Asset protection is different from traditional
retirement or estate planning. It is the systematic
and integrated protection of your family and business
from risk.
Most financial planning is intended to help you
establish wealth so you can retire, and pass on as much
of that wealth as possible to your family after death.
Asset protection plans include estate plans but
are intended to also help you keep your wealth while
you are living. They often involve legal structures
such as family limited partnerships, children's trusts,
exempt assets, offshore trust arrangements and living
trusts.
Asset protection offers you an advantage over
other approaches to financial planning.
For example, more lawsuits are being filed today
than at any time in history, and the top 80 percent of
wage earners in the United States will be sued an
average of five times during their lifetimes.
Other situations include bankruptcy filings,
taxation, insurance company failures or bank financing.
Many small businesses are finding that critical
financing is being pulled out from under businesses
that are current in their loan payments simply because
their bank has been sold or merged and no longer wants
that type of loan.
If someone slips and falls in a business, or if a
car taps their car's rear end, they react like they
just won the lottery. If an armed thug breaks into a
home in the dead of night, slips on a child's marbles,
and breaks a leg, he can sue and likely win.
A small construction firm is having its monthly
partners meeting. They send out for pizza. Their
secretary decides to go pick it up. Unknown to the
partners this person has a horrible driving record. On
the way back the secretary runs into a group of
pedestrians. The police arrive. The secretary eats
the pizza and the partners are sued. A judge decides
that they are liable as the secretary was performing an
act for the partners in her ordinary course of
employment. The jury, sympathetic to the victims and
enraged by the driving record, awards several million
in damages. As partners, all of the owners are jointly
liable for payment. In effect, the jury has awarded
the plaintiffs three condos, two sail boats, three
houses, nine cars, and twelve installment notes to pay
the balance over a lifetime.
A land speculator bought a parcel for subdivision,
held it for one week and sold it to a developer.
Later, after houses were built, a homeowner who was an
environmental engineer noticed an old buried drum. It
contained a deadly toxin. The Environmental Protection
Agency held the site to be a "superfund" site. The
largest law firm in the world, Uncle Sam, began an
action against the landowners. The suit brought in the
land speculator. Although the total invested was only
$100,000, the liability exceeded $30,000,000. Under
the law this can never be discharged in bankruptcy.
The builder and the developer collapsed, leaving the
individual land speculator with an overwhelming
judgment.
Asset protection plans are not only for the
wealthy. An asset protection plan can be relevant if
you drive a car, have children, own a business or
simply want to pay less taxes.
It can come into action in the event of an auto
accident, if someone injures himself at your business,
or possibly in the case of a divorce.
A restaurant owner could easily be at risk, if,
even despite his or her best efforts, a patron drinks
too much and is involved in a drunken driving accident.
An asset protection plan could protect the owner's
personal wealth from a lawsuit even if insurance did
not.
Similarly, a doctor is at risk of malpractice,
regardless of the level of the care provided. Awards
in those cases routinely exceed the amount of insurance
coverage. An asset protection plan could keep the
difference from coming out of the doctor's personal
assets.
Asset protection plans are fully legal. It is not
something for people who might want to avoid the law or
their responsibilities. The law is clear as to what is
permissible and what is not. Asset protection simply
gives protection against unfair lawsuits and gives a
level playing field to operate from.
The goal is to structure the plan so you never
have to misrepresent yourself or worry about the
legality of the plan. A proper asset protection plan
will also reduce taxes and protect assets from IRS
seizure.
The best way to do this is to seek the assistance
of professionals, and there is now a firm that works
with clients from all over the country. They can also
work with your existing lawyers or accountants if you
wish. For a free information package please write:
Asset Protection Corporation, Suite 201A, 14418 Old
Mill Road, Upper Marlboro, Maryland 20772.
