This is our third post in a series dealing with asset protection planning. Such planning, as we have said, is not identical to estate planning, but is a supportive adjunct with its own unique yet related goals and techniques.
On a practical level, it is important to keep asset protection plans as uncomplicated as possible while still achieving your goals. Realistically, an asset protection scheme so complicated that it cannot be explained clearly will make a court suspicious and put one at a disadvantage. On a related note, asset protection plans should be set up with the assumption that the entire plan and its structure will become known and is not a secret. Attempting to set up an asset protection plan that must remain secret can cause major problems, particularly when bankruptcy comes into the picture.
In terms of overseas assets, it is important to be aware that courts do have the power to require debtors to transfer the assets back to the United States. Failure to comply with “repatriation orders” can lead to serious problems. You may not have overseas assets presently, but this should be kept in mind in case you acquire any in the future.
Another piece of advice is that you should not consider that bankruptcy is a good option to fall back on should failure to do asset protection planning result in a major loss of assets. While it is possible to come back out of bankruptcy alive, it is not an easy process, and it has a major impact on your credit. It is much better to do judicious asset protection planning on the front end.
Finally, keeping your assets in the proper place is another important matter to keep in mind with asset protection planning. The biggest point to be mindful of is that business entities should not be used for shielding personal assets. Doing so will probably not prevent a creditor from reaching the assets. When they are correctly drafted and funded, trusts are an excellent tool for protecting personal assets.
Hopefully our discussion of asset protection planning has been helpful. As a final word, it is always advised that you work with a knowledgeable attorney on asset protection matters. An attorney experienced in this area will help you navigate the relevant law, assist in helping you clarify your goals, will explain the risks of any actions or approaches, and will help you in implementing a workable strategy to preserve your wealth.
Source: Forbes, “Ten Rules For Asset Protection Planning,” Jay Adkinsson, 13 July 2011.