We live in a society that files some 70,000 lawsuits per day, many without merit. The high legal costs of defending a frivolous lawsuit often force defendants who have done nothing wrong to pay an out of court settlement. The first step to protection is insurance, but it’s not possible to insure yourself against every possible contingency or exposure. The next step is to implement the tools and strategies developed by asset protection specialists to discourage predatory lawsuits and spurious claims.
A contingent fee attorney is unlikely to launch a lawsuit when there is little prospect of recovery. The best asset protection is an individualized asset protection strategy that:
- Deters litigation by minimizing the economic incentive to sue;
- Insulates business and family assets from the risk of potential liability, without relinquishing asset control; and
- Puts your assets out of reach legally, if it becomes necessary.
Many of the legal tools and strategies have been around for decades. Corporations, limited liability companies, limited partnerships and various trusts are often excellent business structures and effective estate planning vehicles. Properly implemented they can be powerful asset protection tools as well.
A more sophisticated asset protection plan will utilize a Family Limited Partnership (FLP). The FLP provides the safest asset protection available domestically. It creates a legal barrier between your assets and whoever may want to get at them.
The FLP is designed to hold “safe assets” such as stocks, bonds, mutual funds, notes receivable and other liquid assets. The FLP may also own risky assets, such as rental real estate, through membership interests in limited liability companies (LLCs) that have been created to hold the risky assets. LLC owners, like the shareholders of a corporation, generally can not be held liable for the acts of an LLC. Once the risky assets have been placed in an LLC, the FLP can safely hold them.
The ultimate deterrent against lawsuits is an International Wealth Management Trust (IWMT), sometimes referred to as an Offshore Trust. The IWMT serves as the majority limited partner of the Family Limited Partnership. If there is the threat of a lawsuit, the IWMT pulls your assets out of reach of the U.S. court system by legally transferring them to a foreign jurisdiction.
After a lawsuit has been filed or a demand made, it’s too late to protect your assets. The time to act is when the waters are calm.
We are all aware that there is a ton of offense out there. You can’t drive across town without seeing ads for contingency fee attorneys plastered on billboards and bus stops. You can’t watch tv or listen to the radio without hearing the ads. The question is, what kind of defensive asset protection planning have you done? If it is time to consider updates to your plan, call our office at 770-817-4999 to schedule an appointment.