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How much of your current asset base could you afford to lose and still be able to obtain the retirement lifestyle you work so hard to try to achieve? Not a question you like to think about but one that you should think about. Since, however, you’re on the thought of losing part of your retirement asset base, the question becomes could you lose it as a result of being sued?

 
Each day over 70,000 lawsuits are filed in this country and the overwhelming majority of lawsuits are filed against small business owners and individuals with less than $1 million in net worth.
 
Are you an individual who owns their own home, owns investment property, business interests? Are you an individual who employs others and/or has children? If so, then you should ponder the question as to whether you think the legal system would be fair and equitable if you were involved in any type of civil lawsuit. Would you be able to protect your assets from a lawsuit if you were found liable?
 
The best way to protect yourself is to make sure you’re not attractive to someone who might look to sue.In almost all cases, plaintiffs and their attorneys complete their due diligence prior to filing a civil lawsuit and know whether or not the ability to recover is a viable option. A very easy way to tell is to look at liability coverage and the value of assets owned by a potential defendant.
 
A very simple way to protect yourself is to engage in asset protection planning in order to protect your assets from potential lawsuits. An asset protection plan, however, must be in existence prior to an unfortunate circumstance that could rise to liability being assessed against you.
 
The law office of Dugalic & Landau, PC offers valuable asset protection services. Call us today in order to speak with an asset protection attorney about how implementing asset protection strategies and protecting assets can help you protect and preserve the wealth you work so hard to obtain. Our asset protection attorneys are experienced and knowledgeable in legal asset protectionand protecting your assets. Call today in order to speak directly with an asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets. 

I.       What is Asset Protection Planning?

Asset protection planning is an area of law that is designed to help individuals minimize risk of potential liability and to protect assets. The protection of assets is based on the flaws that exist within our civil justice system, whereby thousands of frivolous lawsuits are filed each day throughout our country against those with “deep pockets” or wealth. Engaging in asset protection strategies enables individuals to protect themselves from a civil justice system that is abused and broken.
 
The purpose of asset protection planning is to put obstacles in place between your wealth and individuals who attempt to deprive you of your wealth.  Protecting your assets involves putting in place a customized plan based on individual’s assets and resources.
 
In the end, the objective of asset protection planning is to protect assets such as cash, securities, bonds, real estate, and business equipment from lawsuits brought by individuals, employees or creditors.
 
The law office of Dugalic & Landau, PC offers valuable asset protection services. Call us today in order to speak with an asset protection attorney about how implementing asset protection strategies and protecting assets can help you protect and preserve the wealth you work so hard to obtain. Our asset protection attorneys are experienced and knowledgeable in legal asset protection and protecting your assets. Call today in order to speak directly with an asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets. 

II. What are the benefits of an effective Asset Protection Plan?

1. Additional protection

Engaging in asset protection strategies provides an individual with the opportunity to insure the asset itself, unlike liability insurance. In other words, most liability policies have limits on its liability coverage; however, by implementing asset protectionstrategies you are able to provide an additional level of insurance on the asset if not covered by a liability policy. Even more, asset protection strategies may protect assets that an insurance policy can’t cover.
In addition, implementing an asset protection plan is a one time cost versus the cost of continually paying for liability coverage. Therefore, from the standpoint of cost, it makes sense to engage in asset protection planning in order to insure the asset itself.
 

2. Limits disruptions

No one likes to be disrupted. Now imagine your business and life being disrupted by a lawsuit being filed against your business and, possibly, yourself. This not only disrupts business production but also disrupts your ability to protect assets you own, if you have not previously engaged in a plan to protect your assets. On the other hand, an asset protection scheme serves as an effective deterrent from lawsuits ever being filed in the first place and, in the event a lawsuit is filed, an asset protection plan will influence a settlement to quickly rid of a situation.

 
3. Appreciates in value over time

Once a plan to protect your assets is implemented it is a plan that becomes more effective based on the mere fact of the length it has been in existence. Even more, it’s a plan that does not come at a continual cost.
 

4. Peace of Mind

Peace of mind is something we all strive for in all facets of our life. Asset protection planning is something that provides you with peace of mind in knowing that your wealth is protected and able to be preserved in the event an unfortunate circumstance comes about that rises to the level of a lawsuit being filed against you. As a result, you are able to focus squarely on the things that matter most in life.
 
The law office of Dugalic & Landau, PC offers valuable asset protection services. Call us today in order to speak with an asset protection attorney about how implementing asset protection strategies and protecting assets can help you protect and preserve the wealth you work so hard to obtain. Our asset protection attorneys are experienced and knowledgeable in legal asset protectionand protecting your assets. Call today in order to speak directly with an asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets.

III.    Reduce Exposure to Lawsuits and Taxes

The ability to reduce exposure to lawsuits may involve using a number of asset protection strategies in order to protect assets from liability and minimize taxes in order to preserve your estate for you and your family.
 
There are many asset protection strategies that can be implemented in order to protect assets, however, an asset protection scheme should also factor in estate planning and tax savings.
 
Utilizing sound policies in your business and financial affairs will minimize exposure to lawsuits and minimize taxes. Therefore, having a solid plan to protect assets and minimize taxes can help you reduce having your wealth imposed upon by a plaintiff’s lawsuit and unnecessary taxes.
 
The law office of Dugalic & Landau, PC offers valuable asset protection services. Call us today in order to speak with an asset protection attorney about how implementing asset protection strategies and protecting assets can help you protect and preserve the wealth you work so hard to obtain. Our asset protection attorneys are experienced and knowledgeable in legal asset protection and protecting your assets. Call today in order to speak directly with an asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets. 

IV.    Asset Protection & Your Business

A.   Choosing the right entity

There are a number of different types of business entities that can be utilized in the course of protecting assets and a competent asset protection attorney should be consulted in order to provide you with a clear understanding of what entity choice is the right entity choice under the circumstances. These circumstances include the nature of the business, employee/employer relationship, profits of the business, etc. The various types of business entities utilized in the protection of assets includes, but is not limited to, limited liability companies (LLCs), limited liability partnerships (LLPs), family limited partnerships (FLPs), corporations, etc. There are, however, serious factors that need to be considered, such as potential tax and civil liabilities, before choosing one entity over another and asset protection services of a competent asset protection attorney should be obtained prior to determining what entity choice is right for your business.
 

B.   Avoid certain engagements                                  

There are times when individuals engage in business activities with sincere and honest intentions and yet they fall victim to having their wealth taken out from under them because of potential liabilities they were never aware of. One certain type of activity is entering into business partnerships. Business partnerships can produce huge liabilities for you which are totally unexpected and not your fault. For example, two doctors who engage in a general business partnership would be liable for the acts of each other even if one doctor had no involvement whatsoever with the malfeasance of the other doctor. As a result, a partner can find them self liable and, under the circumstances, the ability to protect assets he or she owns personally could be unavoidable. A business partnership expands the scope of your personal liability when you should be trying to limit your risks. If, on the other hand, the proper asset protection scheme was in place a partner would assume no personal liability for the acts of another. Thus, the lesson to be learned is to engage in asset protection planning before a potential lawsuit arises in order to protect your assets.

C.   Avoid personal guarantees

Even when individuals do the proper planning they undermine it all by providing a lender a personal guarantee on a business obligation. For example, a shareholder of a corporation providing a personal guarantee on a corporate obligation to a creditor would, in turn, subject the shareholder’s personal assets to a claim brought by the creditor in the event the corporation was unable to satisfy its debt. In essence, the shareholder entirely undermined one of the primary benefits of establishing the corporate structure, which is to protect shareholders’ personal assets from the claims of corporate creditors.
In most cases, an attempt to obtain a personal guarantee from a creditor, such as a bank or a landlord, is simply an attempt by a creditor to seek a second source for reimbursement in the event the business is not successful. As a result, the business should be prepared to present the appropriate information in order to avoid an attempt by a creditor in obtaining a personal guarantee.
 
The law office of Dugalic & Landau, PC offers valuable asset protection services. Call us today in order to speak with an asset protection attorney about how implementing asset protection strategies and protecting assets can help you protect and preserve the wealth you work so hard to obtain. Our asset protection attorneys are experienced and knowledgeable in legal asset protection and protecting your assets. Call today in order to speak directly with an asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets.

 
D. Use Multiple Entities

As a general business principle one should separate their business activities by utilizing different entities to conduct each facet of the business’ activities. The overriding goal is to insulate each separate business activity from the liabilities produced by other activities. For example, a real estate investor who leases real estate should own each piece of real estate she owns in a separate business entity. The reason is if there is a lawsuit in connection with one of the properties, the other won’t be endangered.

In addition, assets should be separated amongst certain risk classes. For example, assets which have a high risk of producing potential liability are regarded as “dangerous assets”. Such assets would include real estate, motor vehicles and most business interests. On the other hand, assets which have a very low risk of producing liability are regarded as “safe assets”. These assets may include cash or securities. For example, a business man ran a successful lumber yard and had substantial retirement savings in the bank. If he was sued because of a liability in connection with the lumberyard, his retirement savings could be lost. Instead, merely by putting the lumberyard in a limited liability company (LLC), we removed the “dangerous asset” (lumberyard) from his legal ownership. Then, any lawsuit against the LLC, which owned the business, would not place his other “safe assets” at risk.

Therefore, an individual should always separate their dangerous assets from their safe assets in order to avoid the chance that a successful lawsuit creditor could seek a claim upon the safe assets. The only way a property owner has an opportunity to protect “safe assets” is to have these multiple entities established prior to an unfortunate occurrence that could rise to a lawsuit.
 
The law office of Dugalic & Landau, PC offers valuable asset protection services. Call us today in order to speak with an asset protection attorney about how implementing asset protection strategies and protecting assets can help you protect and preserve the wealth you work so hard to obtain. Our asset protection attorneys are experienced and knowledgeable in legal asset protection and asset protection planning. Call today in order to speak directly with an asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets.
 

V. Asset Protection Trusts

One asset protection strategy that works very well regarding the protection of assets is an asset protection trust. An asset protection trust is a trust that is set up by an individual (grantor) who transfers assets or something else of value to a second person (trustee) in order to hold the assets for the benefit of a third person (beneficiary). In order to be a viable asset protection scheme, however, asset protection trusts must limit a beneficiary’s right to access the assets of the trust when that beneficiary has been sued and a lawsuit creditor is attempting to reach the assets of the trust in order to collect on their judgment. In addition, the language of the asset protection trust must be irrevocable in order to withstand a U.S. Court being able to pierce the trust and gain access to the assets of the asset protection trust for the benefit of a lawsuit creditor.
 
a. Operations of the Asset Protection Trust

From an income tax standpoint, asset protection trusts are transparent in that all income earned from the assets in the trust passes directly to the grantors and is reported on their individual tax return. In legal terms, asset protection trusts are grantor trusts.

In most cases, grantors and beneficiaries of the trust are the same individuals when the trust is initially created. As such, the beneficiaries are able to access the assets of the trust for their own use and enjoyment. Only in the case of an unfortunate circumstance where the “potential for a lawsuit” arises are the beneficiaries restricted from further access to the assets of the trust. The “potential for a lawsuit” are acts defined within the trust document itself, however, it basically includes any activity that threatens the trust assets.

Certain language in asset protection trusts come into play in the event a “potential for a lawsuit” circumstances arises. This language limits the way beneficiaries are able to access the assets of the trust. The beneficiaries of an asset protection trust are still able to access the assets of the trust for their own use and enjoyment. The assets, however, need to be accessed indirectly by the beneficiaries so as to block any claim being made against the trust assets by a lawsuit creditor or the courts. Although the rule for access to trust assets during a period of time where “potential for a lawsuit” exists is indirect access, the net effect is that the assets of the asset protection trust are permanently preserved for the beneficiaries of asset protection trusts. As a result, assets held in asset protection trusts are completely protected from lawsuit creditors and the courts.
 
b. Offshore Asset Protection

Offshore asset protection is simply the process of implementing conventional asset protection strategies and forming them under the laws of an offshore jurisdiction. An example would be an offshore asset protection trust. The use of an offshore asset protection trust is a legal tool that is advantageous in that it will serve to secure and protect assets such as real estate, bank accounts, stock portfolios, jewelry, furniture, artwork and other valuables.

The offshore asset protection trust is a basic trust with special provisions designed for the protection of assets held in the trust. For example, an offshore asset protection trust is similar to a revocable living trust in that it enables an estate to avoid probate and directly distribute assets to heirs. An offshore asset protection trust, however, converts into a foreign trust if the “potential for a lawsuit” situation has arisen that threatens the assets of the trust. As a result, an offshore asset protection trust provides for a level of asset protection that other types of trusts, most notably, a revocable living trust, do not offer.  

Abuse of offshore asset protection trusts began to arise twenty some years ago when some foreign jurisdictions began to hold themselves out as “tax havens” whereby the income earned on the assets in these trusts was essentially “tax free”. Thus, people were transferring their assets to these trusts and not reporting income earned from international investments in order to avoid taxes. As a result, the offshore asset protection trust came under a lot of legal and public scrutiny because the asset protection scheme was being used as a tax shelter. To put an end to this type of conduct the U.S. government implemented changes to the tax code and subsequent tax court decisions effectively ended the illegal conduct.

In addition, offshore asset protection trusts have been come under a lot of legal and public scrutiny as a result of individuals inappropriately setting up the asset protection scheme in order to willingly avoid creditors. The rule is that asset protection trusts, domestic and offshore, must be established in order to protect assets and the structure must be established prior to any potential existing claim by a creditor. If an individual puts an asset protection trust in place while a potential existing claim exists by a potential creditor then the structure and any assets transferred to it could be regarded as a fraudulent conveyance.

The offshore asset protection trust continues to be an advantageous legal tool in protecting assets when threatened with a lawsuit, notwithstanding the attempts of some individuals to willingly avoid income taxes and creditors. An offshore asset protection trust is designed to not allow creditors to invade trust assets. It works as a result of laws enacted by various jurisdictions, for example, the Bahamas and Cooks Islands. These laws, in turn, have been enacted by these jurisdictions in order to attract business and trust assets. As a result, these jurisdictions will not recognize foreign court judgments and the protection of assets in the trust from the claims of creditors continues to exist.
 
c. Medicaid Asset Protection

Long term care planning is really about insuring your retirement assets from medical costs and nursing home care. When you think of long term care you need to begin to think about what type of care you would like to receive and how you are going to pay for it. If you think you may have some reliance on the part of Medicaid in order to cover the cost of nursing home care then you need to be sure that you will qualify. In order to qualify for Medicaid there are certain income and asset base restrictions. Medicaid asset protection planning is designed to minimize or eliminate a spend down of assets by the state and federal governments that administer Medicaid benefits.

Most seniors attempt to transfer their assets to their children or grandchildren in an attempt to qualify for Medicaid. Gifting assets away, however, can have serious adverse legal and tax consequences. Even more, the gifting of assets must have occurred at least 5 years prior to eligibility for Medicaid benefits or the value of the gift made is assessed against your eligibility. In the end, the protection of assets as a result of gifting may not add up.

There are a number of Medicaid asset protection strategies that can be utilized in order to engage in Medicaid asset protection planning. One, in particular, is a Medicaid asset protection trust. This type of trust is an irrevocable trust meaning that you would have to give up control of your assets to a trustee named in the trust. The trustee is able to be appointed by you but once the assets are transferred to the trust that trustee now controls the assets for your benefit. In addition, there are rules and regulations that must be followed in order to shield the assets of a Medicaid asset protection trust from an attempt by Medicaid to spend them down in order to qualify for Medicaid benefits.     

Protecting your assets from a Medicaid spend down requires you to take action now regarding your Medicaid asset protection planning. There are time limits as to when certain planning no longer becomes a viable option in the protection of assets. You should be aware of these time limits in order to put yourself in a position to protect your assets from a Medicaid spend down.

The law office of Dugalic & Landau, PC offers valuable Medicaid asset protection services. Call us today in order to speak with a Medicaid asset protection attorney about how implementing Medicaid asset protection strategies and protecting your assets can help you preserve the wealth you have worked so hard to obtain. Our Medicaid asset protection attorneys are experienced and knowledgeable in legal asset protection and Medicaid asset protection planning. Call today in order to speak directly with a Medicaid asset protection lawyer who will help you understand and implement a plan that will enable you to protect your assets.
 

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