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Asset Protection

Asset protection is a set of legal techniques used for protecting assets of individuals and business entities from civil money judgments. Assets that are shielded from creditors by law are few (common examples include some home equity, certain retirement plans, and sometimes interests in LLCs or limited partnerships). Assets that are almost always unreachable are those to which one does not hold legal title. In many cases it is possible to vest legal title to personal assets in a trust while retaining all the control of the assets. The goal of asset protection is similar to bankruptcy, and the two practice areas go hand-in-hand. When a debtor has none to few assets, the bankruptcy route is preferable. When the debtor has significant assets, asset protection may be the solution.1

All 50 U.S. states provide some protection for the assets of a trust against the creditors of the beneficiaries. Creditors have several tools to overcome the laws that provide asset protection. First, there are federal and state fraudulent transfer laws,2 which define what constitutes a fraudulent transfer. Most of these laws provide that a transfer made by a debtor is fraudulent as to a creditor if the debtor made the transfer with the "actual intention to hinder, delay or defraud" any creditor of the debtor.

There are also laws which allow a creditor to pierce the corporate veil of an entity and go after the owners for the debts of the entity. It may also be possible for a creditor of a member to reach the assets of an entity through a constructive trust claim, or a claim for a reverse piercing of a corporate veil.

Asset protection planning requires a working knowledge of federal and state exemption laws, federal and state bankruptcy laws, federal and state tax laws, the comparative laws of many jurisdictions (onshore and offshore), choice of law principles, in addition to the laws of trusts, estates, corporations and business entities. The process of asset protection planning involves assessing the facts, circumstances, and objectives of an individual, evaluating the pros and cons of the various options, designing a structure that is most likely to accomplish all the objectives of the individual (including asset protection objectives), preparing legal documents to carry out the plan, and ensuring that the various legal entities are operated properly in accordance with the laws and the objectives of the individual. This process involves providing legal advice and legal work and most states prohibit the practice of law without a license.

References:

1. Jacob Stein (September 10, 2010). "McCourt Divorce Shines A Light on Asset Protection". Los Angeles Daily Journal. Retrieved September 27, 2010.

2. 11 USC § 548

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© Copyright Law Offices of Peter Holzer. All Rights Reserved. This website includes information about legal issues and are for informational purposes only. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You should contact an attorney for advice on specific legal problems. Neither your receipt of information from this website, nor your use of this website to contact our attorneys creates an attorney-client relationship between you and The Law Offices of Peter Holzer. In accordance with IRS requirements, this is to inform you that any information on this website that could be construed as U.S. tax advice is not written or intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed on this website. As a convenience, this website may provide links to third-party websites. Such linked websites are not under the control of The Law Offices of Peter Holzer , and the Law Offices of Peter Holzder takes no responsibility for the accuracy of the contents of such websites.