Who needs Asset Protection?
Business owners, contractors, professionals such as doctors, dentists, lawyers and accountants, as well as property owners should be particularly aware of the risks associated with conducting their business, practicing in their respective fields, and taking responsibility for others (employees, clients, or vendors) as more and more people are using the legal system to deprive others of their life's work. Over 19 million new lawsuits are filed in the United States every year, many of which are frivolous or settled for sums greater than the actual liability.
Without a massive overhaul of our legal system, the risk and potential liability is not going to decline. In fact it has steadily increased over the last few decades. Assets can be at risk due to a number of vulnerabilities, including personal injury suffered on your premises, from a car accident, of an employee, negligence while working, liability arising from a guaranty of the debts of another, lawsuits from former business partners. There are proven, legally-sound strategies that will help preserve wealth and safeguard against frivolous claims.
We represent professionals, small business owners, property owners, and other clients with the goal of protecting their assets against potential litigation, judgments, liens, and fraud.
Asset protection tends to follow the following levels of protection:
1. Some assets are protected by law
In Nevada and subject to statutory limitations, the following assets are typically protected by law; the equity in your home, your car, assets in your 401(k), and 75% of your take-home pay as well as many other smaller exemptions are protected against seizure. If these are your only assets, you are, in essence, judgment proof.
2. Insurance
Insurance is the next line of defense. It is relatively inexpensive and has protected asset owners from billions of dollars in claims. Insurance should be strategically purchased. However, even if high deductible policies are considered, insurance usually provides a legal defense and for that reason alone should not be dropped.
3. Entities such as Corporations and LLCs
Entities such as corporations and LLCs are a must for the business owner. Not only do entities provide asset protection, they are beneficial under the tax code. What entities do is take "dangerous activities" such as a contractor hiring workers and put a wrapper around the activity. Liability may still arise inside the wrapper, but the wrapper protects your other assets from the liability – this is referred to as protecting against an inside liability. In addition, entities protect against outside liabilities (where the liability arose outside the entity). For outside liability, entities rely on charging order protection, which, in NV is very strong.
4. Irrevocable Nevada Trusts
Nevada has been named by a national attorney as the best state for asset protection trusts. Asset protection trusts in NV can be self-settled (meaning for the benefit of the grantor) or for the benefit of a third party. Different trusts have different rules, but assets owned by a properly structured trust, are generally not subject to claims against their beneficiaries. They they act as an excellent tool for protecting your assets.
5. Off-shore trusts
Off-shore trusts are essentially Nevada Trusts on steroids. If assets are held in an offshore trust they are further from the scrutiny of creditors and there is less worry that a claim arising in another state might be able to attack the Nevada Trust. For certain individuals, off-shore trusts are a key element of their estate planning; however, they are easy or cheap. A client’s willingness to follow the rules is crucial.
Fraudulent conveyances -
It is crucial to realize that any transfer made to hinder, delay or defraud a creditor is a fraudulent conveyance. Asset protection planning is most successful when it is developed while things are calm (you buy the insurance before the car wreck - just in case), when there are no known claims. If a claim has been made, you can still engage in asset protection with those assets that won’t be necessary to satisfy the claim.
Guarantees –
There are no guarantees in asset protection planning. The goal in asset protection planning is to create hurdles. Some hurdles work to make a claim disappear, other hurdles work to postpone or reduce liability. Our firm has expertise in assisting clients to arrange their finances, real property and other assets in a manner that minimizes their exposure to potential creditors. We are well versed in establishing trusts, determining insurance needs, creating estate plans and organizing investments and business entities so that our clients are able to enjoy the highest level of confidence in terms of the security of their accumulated assets. |