Asset protection planning involves the implementation of strategies to protect wealth by placing assets beyond the reach of creditors. In essence, your financial affairs are arranged in ways that emphasizes risk management and preventive planning, such that it discourages lawsuits, isolates risk, limits liability, and promotes settlement. To that extent, asset protection encompasses more than just protecting assets and actually works to preserve your wealth. Protection, then, should reflect preservation, and a properly architected and implemented asset protection plan is best done in ways that judges will respect. Principled asset protection planning therefore involves the mastery of optics and the drafting of your story.
It is thus imperative that your attorney be proficient in and understand the tenets of various areas of law, be informed on how judges actually interpret the law, and be well-versed in the methods used by creditors to pierce asset protection structures. Accounting for current law while creating a plan that is flexible enough to adapt to changes in existing law is what your attorney must offer, and the particular facts of your case should result in creative and innovative solutions. There does not exist a one-size-fits-all type plan and what works for one individual or business may not be the best choice for a different individual or business. As such, a detailed analysis of the circumstances unique to each case will shed light on the best type of strategy needed to protect your assets, whether that be a preventive or proactive type plan, domestic or offshore, or complete integration.
Iacone Law, P.A. will show you how family asset protection can successfully protect your legacy, your lifestyle, your cash flow, and ultimately your family from financial harm.
Family asset protection planning aims to keep wealth within the family and outside the reach of your creditors. When properly structured and implemented, family asset protection will:
- Allow wealth to grow safely within the family
- Diversify and centralize ownership of assets
- Provide for its orderly disposition and transfer
- Ensure that assets remain protected from the whims of result-oriented judges and juries
Family asset protection is often combined with estate, business, and tax planning, such that the asset protection benefits of your family plan remain a compliment, and not a supplement, to other life planning. It is thus not uncommon for your attorney to work closely with your financial advisor and accountant.
To that effect, family asset protection works best when implemented through integration and carried out in the context of other life planning, especially when litigation is on the horizon or has already commenced. This is because creditors, under the doctrine of fraudulent transfer, will attempt to unwind your plan and pierce the structure by alleging that all such transfers into it were designed to defeat the rights of a creditor to collect on a debt. Thus, it is imperative that your asset protection attorney analyze the timing and purpose of such transfers in order to best design a plan that avoids fraudulent transfers and survives judicial scrutiny.
The titular question is not whether you will ever be sued, but rather whether you think you will be treated fairly in a lawsuit.
Accordingly, personalization is key to maximizing family asset protection. Identifying your future potential creditors, understanding your risk tolerance, and defining your goals are among many analyses necessary before engaging in any transfers that one could classify as fraudulent. In addition, preventive type family asset protection planning calls for different techniques than proactive type planning, so creativity and innovation in this area are tantamount to success.
With proper counsel, family asset protection can be achieved alongside generational wealth planning, confidentiality, and tax efficiency.
Business asset protection will keep you focused on making money by isolating risk, limiting liability, and discouraging lawsuits.
Arranging your business affairs and assets in ways that prevent the distractions of litigation from disrupting your cash flow and income is a central tenet of proper business asset protection planning. In essence, business asset protection is risk management through the use of creative and innovative structures and techniques.
There are many moving parts in a business, each of which may generate its own liability or be financially attractive to a creditor, or both. Common examples include intellectual property, equipment, land, transportation, accounts receivable, cash, and other tangible and intangible assets. To take one example further, it would make for an odd business relationship if your creditor were to obtain your trademark in a lawsuit and then charge you royalties for using what was formerly your name.
What risks are there to my business?
In addition, the following are common risks and liabilities to a business:
- Personal guarantees
- Loss of income
- Officer and director liability
- Negligence theories
- Successor and joint enterprise liability
- Veil piercing and reverse-veil piercing
- Vexatious litigants
- Overzealous lawyers
Is the business owner also a risk to the business?
In fact, even the business owner can be a risk to the business, such as in the following scenarios:
- Failure to follow business formalities
- Allegations of improper conduct or fraud
- Partnership disputes
- Inadequate or no governing documents
- Single-member LLCs (in the case of Florida), among other matters
And the list goes on.
There are a multitude of arguments that creditors can use against you and your business in order to make you personally liable for business debts, or even the business liable for your own debts. In addition, businesses that keep all of their eggs in one basket, i.e. all of their assets inside the business, unnecessarily expose themselves to more risk by failing to separate different business purposes or segregate certain assets.
Structure your business by unbundling it.
Proper business asset protection will thus involve the use of a variety of structures, each personalized to your business objectives, preference, and risk tolerance. The following are examples of what may be used in your overall business structure in order to best shield your assets and limit liability:
- Special purposes entities
- Holding companies
- Leasing and licensing companies;
- Financing entities
- Accounts receivable or billing and collection entities
- Management companies, among others
Business asset protection will involve clever and innovative strategies.
These techniques, also called unbundling, will compliment other business asset protection strategies, as follows:
- Equity stripping
- Funding and capitalization through the use of promissory notes
- Distinctive ownership structures
- Properly drafted operating agreements
- Clever management arrangements
When combined with tax planning and succession planning, business asset protection when properly implemented will be a powerful asset in and of itself, and one that your business asset protection attorney will customize both for you and the business.
Domestic asset protection is planning that utilizes state and federal law within the United States in order to favorably structure one’s affairs so that assets are placed outside the reach of creditors. Domestic asset protection is particularly important because in most cases both the assets and the person owning those assets are located within the United States. Consequently, the debtor (or soon-to-be debtor), the strategies and techniques employed to protect assets, and the resulting domestic asset protection structure will be subject to the jurisdiction of United States judges and juries.
This is why domestic asset protection should be structured and implemented in ways that judges will respect. Special emphasis is thus warranted on two key concepts that will shed light on the effectiveness of your domestic asset protection plan: fraudulent transfer issues and having asset protection as your goal (both of which are discussed in depth elsewhere on the website).
A fraudulent transfer is a conveyance or transfer of assets made with the intention to hinder, delay, or defraud a future or present creditor. It is by far the most powerful and popular tool a creditor can use to set aside a transfer and back the asset out of the structure. In fact, in domestic asset protection planning, the transfer of the asset is arguably more important than the structure itself, as an otherwise bulletproof structure will be worthless if a judge can simply unwind the transfer or conveyance. Thus, proper domestic asset protection planning will encompass an analysis of the timing, solvency, value, and intent behind the supposed transfer.
Having asset protection as your goal deals directly with intent, which as you will note is also an arm of fraudulent transfer theory, and can negatively or positively influence how others perceive your asset protection structure. It is thus crucial in domestic asset protection planning that the asset protection component of the plan be the effect, and not the goal, of what precipitated you to arrange your affairs. Accordingly, domestic asset protection is much more effective when its perceived purpose is estate, business, tax, or financial planning, rather than purely asset protection. The mastery of optics is key in domestic asset protection, which is why it is important to create structures and consummate transfers that judges will respect.
What tools are available in domestic asset protection?
There are a number of powerful tools available in domestic asset protection, but each of course is highly dependent upon state law. Florida, for example, offers maximum asset protection for:
- Retirement accounts
- Life insurance
- Tenancy by the entireties
- Statutory exemptions, among others
In addition, domestic asset protection can also involve the use of:
- LLCs (not corporations)
- Revocable and irrevocable trusts
- Creative financing agreements
- Equity stripping and collateralization
- Unbundling and segregation of assets
- Confidentiality techniques, among others
What are the advantages of domestic asset protection?
Domestic asset protection has noted advantages over offshore asset protection. What follows are some of its advantages:
- Peace of mind that planning is done within the comfort of your home jurisdiction
- Better image among judges and the plaintiffs’ bar, i.e. no questions as to why transferring assets out of the United States
- Less costly
- Tax compliance and reporting straightforward
- Due diligence less burdensome
- Solid asset protection depending on the facts
- Benefit of well-settled case law and debtor friendly states, among others
What are the disadvantages of domestic asset protection?
Of course, one would not be able to gauge the advantages of something if there were no disadvantages from which to reference. And in the case of domestic asset protection, it is important to keep the following in mind:
- The Supremacy Clause of the United States Constitution, meaning that less favorable federal law may preempt favorable state law in derogation of your asset protection plan
- Full Faith and Credit of the United States Constitution, meaning that a judgment rendered in one state may be enforced against you in the state where you or your assets are located
- Diversity of jurisdiction, meaning that a creditor could force you into federal court
- Public policy, meaning that courts as a matter of principle may pierce your asset protection structure because it is just, fair, and equitable to do so
- Result-oriented judicial system and our litigious society
- Collection law of state where asset is located applies as opposed to where asset is titled
- Asset still within U.S. jurisdiction
- Law on fraudulent transfers and asset protection in general not as robust as in offshore jurisdictions, among others
This is not to say, of course, that domestic asset protection is inferior to offshore asset protection. To the contrary, when properly structured and implemented, domestic asset protection will certainly serve its purpose and be more than sufficient for most individuals. Ultimately, it is your facts, preferences, risk tolerance, and goals that will guide the attorney in advising and personalizing a structure best suited to your needs.
Offshore asset protection planning places your assets outside the jurisdiction of the United States and beyond the reach of U.S. judges and juries. Consequently, offshore asset protection is a significant obstacle to creditors and is the source of warranted frustration from plaintiffs’ attorneys. This is so because offshore asset protection has a chilling effect on the probability of collection and may even force a hostile party to file suit or seek redress directly in a foreign court, which in all but the most egregious cases is highly unlikely to happen.
What is certain, however, is that domestic planning is generally not as strong as offshore asset protection in terms of protection against domestic litigation, excessive jury awards, result-oriented judges and juries, and motivated attorneys who seek to collect up to 40% of whatever they recover from you. Offshore asset protection planning thus strokes at the psychology of those who wish to take your assets by tilting the economic analysis of the case in your favor – that is, whether the amount of hours spent on litigation will justify any potential recovery, if any.
When properly implemented, offshore asset protection planning will result in the creation of a formidable structure built upon a strong foundation of laws that emphasize protection and cater to debtors, similar to states like Florida and Delaware. For example:
- Statute of limitations for fraudulent transfer claims are reduced or eliminated
- Dtandard for piercing through offshore trusts and LLCs are equivalent to the U.S. criminal standard, which is beyond a reasonable doubt, as opposed to the more lenient preponderance of evidence
- Bonds required in order to initiate proceedings against offshore structures
- Laws modeled after favorable state law in the United States, but tweaked to provide for more solid asset protection
- “chilling” effect on creditors
- U.S. judgments not enforced
And it is this abundance of protective legislation, coupled with the psychological aspect of going offshore, that dispenses with litigation and leads to favorable settlements. In fact, offshore jurisdictions even amend their own laws to account for changes in American legal jurisprudence. For example, after the Florida Supreme Court decided that charging order protection was not the exclusive remedy for single-member LLCs (this has since been “patched” by the Florida legislature, albeit with certain caveats), Nevis amended its limited liability company act to underscore that charging order protection does indeed apply to single-member LLCs.
Availing yourself of the benefits of offshore asset protection will require the respect of domestic U.S. judges and juries, which is why it’s important to properly architect and implement these structures. After all, you are still here and thus subject to the jurisdiction of the courts and their orders, which may include contempt for poorly timed or egregious offshore planning. Therefore, offshore asset protection must be done carefully, cautiously, and under the guidance of an experienced attorney.
This is so because inaccurate and often injurious information is rampant in the offshore asset protection arena, which inevitably leads to planning uncertainties. Litigators flourish when there are uncertainties, and without proper planning, offshore asset protection may actually prove to be self-destructive.
Personalized Offshore Asset Protection
Going offshore isn’t just about protecting your assets, and it shouldn’t be either.
If a creditor asks you why you went offshore, and the only intelligent answer you can give is “for asset protection,” then you have just become the creditor’s star witness in their case against you.
This is why the purpose of your planning is crucial, especially when dealing with fraudulent transfer allegations. Your attorney, in conjunction with your advisors, will help you craft this purpose, be it for business, estate, financial, or other planning. In addition, diversification of wealth and access to alternative investments is a valid planning objective, and diversifying your portfolio in terms of currency, country, and culture is principled financial planning.
Offshore asset protection planning is accomplished in numerous ways, the most important avenue being personalization. It is not so much the structure that counts, actually, as that is something you can look up on Google, but rather the planning that goes into making those structures a right fit for you. To that end, the following should be dutifully analyzed:
- Exporting the assets vs. importing the law
- Timing of you planning, i.e. litigation on the horizon
- Proactive planning vs. preventive planning
- Evaluating your risk tolerance and vulnerability to litigation
- Examining your creditors
- Transferring assets in ways that serve a purpose other than asset protection
- Effectively contributing to and capitalizing offshore LLCs
- Properly funding offshore trusts
- Using offshore management and personal financing companies
- Creating structures that spring offshore during times of financial duress
- Properly engaging offshore providers, banks, protectors, and SEC registered financial advisors
The pursuit of personalization and ultimate integration of your plan will govern the effectiveness of offshore asset protection, and understanding the legal nuances and practical implications behind it will lead to stronger structures.
We work with the following countries, among others:
- Cook Islands
- New Zealand
- U.S. Virgin Islands
In order to properly implement your offshore asset protection plan, we work with the following individuals located offshore, among others:
- Offshore providers and registered agents
- Our network of international attorneys and CPAs
- Financial institutions
- SEC registered financial advisors