Twelve Asset Protection Mistakes

There are many benefits from establishing an offshore structure as part of your plan for savings, retirement funds, investments, and of course business and commerce.  Our team can customize the Asset Protection Plan around your financial goals to help you avoid common asset protection mistakes.

Here are 12 common mistakes you should avoid when creating your asset protection plan:

1. Assuming asset protection is illegal. Some people mistakenly assume that asset protection is illegal. However, people are free and it is legal for them to protect their assets and arrange them in a way that is best for their individual situations. An issue with fraud only happens if the assets are protected for the purpose of obstructing or defrauding creditors.
2. Using the wrong trust. Be sure you’re using the correct type of trust to protect your assets. For example, a revocable trust may not be a good asset protection trust.
3. Not Understanding the Importance of Privacy.  Privacy is important when it comes to protecting assets because it discourages lawsuits. Think about it. Who do you think a plaintiff’s lawyer (who only gets paid if he wins a case and collects) will be more excited about — (a) a defendant who has no trace of owning any property according to the internet, or (b) a defendant whose name appears on multiple LLCs and other properties? Obviously, you will be more likely to sue the person who has easily identifiable assets to go after once you get a judgment. However, maintaining privacy is increasingly difficult to maintain in today’s internet-based world. We can help you maintain privacy using a combination of various legal structures.
4. Relying on a Will or Revocable Living Trust to protect assets.  Everyone needs a Will or Revocable Living Trust as a bare bones estate plan. However, a Will and Revocable Living Trust will not protect assets from claims of creditors during your lifetime. A Will comes into effect at the death of an individual and, for this reason, provides zero Asset Protection during life. Similarly, because a Revocable Living Trust is just that – revocable– it provides zero Asset Protection for the Settlor.
5. Relying on Insurance Alone.  While insurance is a helpful addition to an Asset Protection plan, it is by no means a replacement for an Asset Protection plan. Insurance protects you from certain types of claims or from risks associated with a certain activity, whereas an Asset Protection plan will protect your property regardless of the reason for the lawsuit.  Additionally, insurance companies may attempt to escape paying a claim if a large judgment is rendered against you. Your Asset Protection plan will remain in full force regardless of whether your insurance is available.
6. Not having or delaying an asset protection plan.  Lacking a plan is common for most people, thinking that asset protection is only for the rich and celebrities. The problem is that anyone can fall victim to creditors, liability lawsuits, or in need of long-term nursing care. Further, there is the issue of inheritance and estate and property taxes. Unless you have nothing on your name, you should consider asset protection before waiting until an incident occurs as then it would be too little too late or even illegal.
7. Placing all assets into joint ownership with another family member. This is often regarded the same as a transfer and can result in lengthy disqualification periods. And it typically provides no protection to your assets. It can also create unfortunate legal problems for families.
8. Not Using an Attorney.  It is very important to work with an attorney in creating your Asset Protection plan. If you do not use an attorney, then any information you share with the person creating your Asset Protection plan will not be protected by the attorney-client privilege and could easily become public record. The protection provided by the attorney-client privilege is very important to the success of your Asset Protection plan.
9. Picking the wrong asset protection lawyer/expert. Equally costly as not having any asset protection plan is picking the wrong person to help you. You want an attorney versed in the current laws, the limitations of various options, and the best alternatives. They should have experience in the field and should be able to point to a successful portfolio and, where possible, use someone with the proper recommendations.  Asset protection is certainly not a quick fix or something you can undertake using a premade plan online. You will need to think about it deliberately and find an expert experienced in the field to help craft a comprehensive plan. Even then, it will still require your continued attention to ensure it is updated and the relevant assets continue to be titled under proper structures.
10. Not considering the tax consequences of your plan.  Taxes are a vital consideration in any asset protection plan you draw up. Part of the reason most people start thinking of asset protection is to legally limit their taxes and what their inheritors pay once they get ownership of the property.  However, the probate process and income tax can eat a considerable portion of your property when done wrongly. You must consider who pays the taxes with different ownership and the stipulations, especially across different assets. Whichever plan you come up with should illustrate how shielded you and your inheritors are to various taxes.
11. Failing to title/fund your trust.  Another mistake people make is setting up a trust but failing to title them accordingly. It happens when you do not move the assets you want to protect to the trust’s account. Some people even sell assets titled under the trust, and in case they buy new ones, say a house, they do so in their names, which exposes your assets to estate taxes and probate.
12. Do nothing.  Unless you have no assets to protect or are unconcerned about potential future lawsuits, you need to take steps today to protect yourself and your lifetime of earnings. Many people get overwhelmed by the process and do nothing- which in many cases can be financially devastating. If you do not feel competent to handle this on your own, you should consider seeking the services of an attorney or other professionals who can assist in your overall plans and help you achieve your financial and other goals.

The laws are not the same in every state. Unfortunate and costly mistakes can be made if you do not know what you are doing.  We can walk you through the entire process and explain all documents that must be collected to facilitate a timely and stress-free experience, our lawyers can even advise you on the best jurisdiction based on your exact need.​

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