Strategies & Techniques for Estate Planning


Asset Protection Planning

One of the main purposes of asset protection planning is to segregate and insulate liabilities away from valuable assets to the greatest extent allowed by applicable law, so as to reduce the debtor’s profile and amenability to lawsuit, as well as to conduct a lawful “asset freeze” by shifting valuable assets to other family members (in trust or otherwise) at a time when the debtor has no existing or foreseeable claims. Asset protection planning is also, to a significant degree, pre-litigation and pre-bankruptcy planning that seeks to maximize the use of exemptions allowed by the state and federal legislatures, and other forms of protecting assets as recognized by established or anticipated law.
Asset protection planning is not meant to cheat legitimate creditors, ex-spouses, business partners, investors, etc., and in court one who attempts to use asset protection for such behavior should expect very liberal pro-creditor rulings.

Privacy and Asset Protection
Lowering the asset profile of individuals has long been a goal of asset protection planning. While in the past this was done primarily to discourage frivolous lawsuits, it has become much more important today. With identity theft, phishing, pharming, and similar criminal schemes being rampant, it makes sense to keep valuable assets out one’s personal name or from being reported under one’s social security number of other identifier.
By transferring assets into trust or to business entities, the assets are no longer held or reported in an individual person’s name and thus it is much more difficult for criminals to find or access either the account information or the assets themselves. Thus, even if the individual’s identity is compromised and accounts accessed, the assets held in entities should be unaffected and thus available for transfer to the individual’s new accounts to pay bills, etc., while the identify theft matter is being resolved.
Indeed, one of the firm’s partners was the victim of identity theft earlier in the year, and it took nearly a month before a major bank was able to investigate the claim and refund the stolen dollars back into the partner’s account. Fortunately, the partner held most significant assets in the names of other entities that he owned, and was not overly inconvenienced by the event.
Thus, asset protection can sometimes be a planning necessity even when it is not done in contemplation of possible creditors.