Stealth Wealth Protection: What It Is and How to Get It
Lots of people contact me because they're interested in protecting their assets. Yet, in setting up "asset protection plans" for clients, I always caution them never to refer to it as, well, an "asset protection plan." Why it that? It's because "asset protection" has a negative connotation, especially in the United States. The United States has a very "creditor friendly" court system. If you put your assets outside a creditor's reach, many judges will view you as a deadbeat who doesn't want to pay your bills.
Whatever You Do, Don't Say "Asset Protection"
For that reason, when you set up an asset protection plan, there needs to be other reasons for your plan to exist other than just asset protection. If you can prove that these other reasons actually exist, then the asset protection part of the plan has a much better chance of holding up in court. Here's an example. Let's say that you decide you want to set up an "asset protection trust." You consult with a trust company in, say, the Cook Islands, and the company obligingly sets up a Cook Island international trust. What have you accomplished? Yes, you now have a trust in the Cook Islands, with one of the world's strongest asset protection laws. But it also looks like you set up a standalone structure that screams "deadbeat" to U.S. judges. To force "deadbeats" to pay their bills, judges have a variety of tools at their disposal, including jailing a debtor. This last remedy isn't common, but it does exist most notably, in situations where a debtor or the debtor's legal advisors have made serious planning errors.
Understanding and Avoiding the "Anderson Fiasco"
One of the most famous examples of jailing a debtor happened in the Anderson case. Mr. and Mrs. Anderson were allegedly engaged in a Ponzi scheme. The Federal Trade Commission (FTC) sued the Andersons in federal court and obtained a US$20 million judgment. When the Andersons claimed that they couldn't pay the judgment, the FTC obtained a court order requiring the couple to repatriate US$8 million in assets from their Cook Islands trust. The Andersons failed to obey this order and the judge jailed the couple for civil contempt. A federal appeals court affirmed this decision. The judge released the Andersons from jail only after they:
Appointed a company controlled by the FTC as the new trustee for their trust
Amended the trust to remove the FTC from the definition of "excluded persons" under the trust deed
Resigned as their own trust protectors However let me put you at ease. The Anderson case was a phenomenon, not the rule. They experienced these problems because there were serious errors in their trust. The Andersons' biggest mistake was they named themselves as both the trust's co-trustees and co-protectors. They only gave up that position once their trial began.
It Doesn't Have to Be This Way
Let me assure you: This was truly the worst case scenario. You don't have to go to jail to protect your assets. There are plenty of perfectly legal domestic and offshore plans you can use to shield your assets. But the most important thing to remember is: Make sure asset protection isn't transparently the sole purpose of your plan. Returning to your example, let's say after consulting with a qualified attorney in the United States, you jointly decide that a Cook Islands trust should be part of your asset protection plan. Only, instead of having the trust being the only element of the plan, your trust exists as part of a larger structure that accomplishes other goals.For instance, an integrated structure that includes a Cook Islands trust might also contain your last will and testament, a living trust, and possibly a domestic limited partnership. At your death, your residual assets "pour over" from the will into the living trust. Properly structured, this configuration serves several purposes that are completely unrelated to asset protection:
~Provides convenient access to non-U.S. investments
~Doubles the estate tax exemptions for a married couple
~Provides the opportunity for valuation discounts for gift tax purposes through gifts of limited partnership interests
~Serves as the primary estate planning device after your death
Depending on your particular needs, many other elements can be brought into this structure. The important point, though, is that asset protection is no longer the only exclusive purpose for your plan. Asset protection is simply a byproduct of a more diversified plan, because the assets will be safely tucked away offshore, safe from creditors. In this way, you're getting what I call "asset protection by stealth." It's not obvious to anyone looking at your plan, but it's a useful, undisclosed perk of your overall plan.
Don't Wait! Take Action Now Before It's Too Late
The time to set up this type of plan isn't after you've received notice of a lawsuit. You should form it when there are no pending claims against you, or that you even know about. If you wait until after you have claims against you or a pending lawsuit, then a court can later declare your plan was intended to "hinder, delay or defraud" creditors. This makes the asset transfer a voidable "fraudulent conveyance" in the eyes of the law. Please make sure you speak to a qualified asset protection attorney to find out if this is the best time for you to set up this type of plan. This way you can ensure your actions won't constitute a "fraudulent conveyance." Bottom line: It's not hard to avoid an Anderson-type fiasco. Simply make sure your plan has other legitimate purposes besides asset protection. Plus, by properly structuring your plan this way, you can secure additional perks like investment diversification and estate planning while getting the asset protection you desired all along.
Lots of people contact me because they're interested in protecting their assets. Yet, in setting up "asset protection plans" for clients, I always caution them never to refer to it as, well, an "asset protection plan." Why it that? It's because "asset protection" has a negative connotation, especially in the United States. The United States has a very "creditor friendly" court system. If you put your assets outside a creditor's reach, many judges will view you as a deadbeat who doesn't want to pay your bills.
Whatever You Do, Don't Say "Asset Protection"
For that reason, when you set up an asset protection plan, there needs to be other reasons for your plan to exist other than just asset protection. If you can prove that these other reasons actually exist, then the asset protection part of the plan has a much better chance of holding up in court. Here's an example. Let's say that you decide you want to set up an "asset protection trust." You consult with a trust company in, say, the Cook Islands, and the company obligingly sets up a Cook Island international trust. What have you accomplished? Yes, you now have a trust in the Cook Islands, with one of the world's strongest asset protection laws. But it also looks like you set up a standalone structure that screams "deadbeat" to U.S. judges. To force "deadbeats" to pay their bills, judges have a variety of tools at their disposal, including jailing a debtor. This last remedy isn't common, but it does exist most notably, in situations where a debtor or the debtor's legal advisors have made serious planning errors.
Understanding and Avoiding the "Anderson Fiasco"
One of the most famous examples of jailing a debtor happened in the Anderson case. Mr. and Mrs. Anderson were allegedly engaged in a Ponzi scheme. The Federal Trade Commission (FTC) sued the Andersons in federal court and obtained a US$20 million judgment. When the Andersons claimed that they couldn't pay the judgment, the FTC obtained a court order requiring the couple to repatriate US$8 million in assets from their Cook Islands trust. The Andersons failed to obey this order and the judge jailed the couple for civil contempt. A federal appeals court affirmed this decision. The judge released the Andersons from jail only after they:
Appointed a company controlled by the FTC as the new trustee for their trust
Amended the trust to remove the FTC from the definition of "excluded persons" under the trust deed
Resigned as their own trust protectors However let me put you at ease. The Anderson case was a phenomenon, not the rule. They experienced these problems because there were serious errors in their trust. The Andersons' biggest mistake was they named themselves as both the trust's co-trustees and co-protectors. They only gave up that position once their trial began.
It Doesn't Have to Be This Way
Let me assure you: This was truly the worst case scenario. You don't have to go to jail to protect your assets. There are plenty of perfectly legal domestic and offshore plans you can use to shield your assets. But the most important thing to remember is: Make sure asset protection isn't transparently the sole purpose of your plan. Returning to your example, let's say after consulting with a qualified attorney in the United States, you jointly decide that a Cook Islands trust should be part of your asset protection plan. Only, instead of having the trust being the only element of the plan, your trust exists as part of a larger structure that accomplishes other goals.For instance, an integrated structure that includes a Cook Islands trust might also contain your last will and testament, a living trust, and possibly a domestic limited partnership. At your death, your residual assets "pour over" from the will into the living trust. Properly structured, this configuration serves several purposes that are completely unrelated to asset protection:
~Provides convenient access to non-U.S. investments
~Doubles the estate tax exemptions for a married couple
~Provides the opportunity for valuation discounts for gift tax purposes through gifts of limited partnership interests
~Serves as the primary estate planning device after your death
Depending on your particular needs, many other elements can be brought into this structure. The important point, though, is that asset protection is no longer the only exclusive purpose for your plan. Asset protection is simply a byproduct of a more diversified plan, because the assets will be safely tucked away offshore, safe from creditors. In this way, you're getting what I call "asset protection by stealth." It's not obvious to anyone looking at your plan, but it's a useful, undisclosed perk of your overall plan.
Don't Wait! Take Action Now Before It's Too Late
The time to set up this type of plan isn't after you've received notice of a lawsuit. You should form it when there are no pending claims against you, or that you even know about. If you wait until after you have claims against you or a pending lawsuit, then a court can later declare your plan was intended to "hinder, delay or defraud" creditors. This makes the asset transfer a voidable "fraudulent conveyance" in the eyes of the law. Please make sure you speak to a qualified asset protection attorney to find out if this is the best time for you to set up this type of plan. This way you can ensure your actions won't constitute a "fraudulent conveyance." Bottom line: It's not hard to avoid an Anderson-type fiasco. Simply make sure your plan has other legitimate purposes besides asset protection. Plus, by properly structuring your plan this way, you can secure additional perks like investment diversification and estate planning while getting the asset protection you desired all along.
1 comment:
replica evening bags replica bags london replica bags supplier
Post a Comment