Asset Protection is not about Hiding your Assets
AR&H clients have many questions about wealth management, but one of the most common is how to legally protect their assets. A misconception is that asset protection involves hiding or putting the assets in a different name or location where they are less likely to be found by certain parties. But hiding your assets from creditors who are pursuing you can actually subject you to civil and criminal liability.
Asset protection is the act of legally structuring your assets in a way that prevents them from being lost due to a lawsuit or a series of bad business decisions.
The unfortunate reality is that we are living in a highly litigious period of American history. In 2019, an estimated 40 million lawsuits were filed. Some of these lawsuits were legitimate and you can assume that some were not. Many business owners and families end up settling the more frivolous lawsuits outside of court because of high legal costs and the risk of going to trial.
If a client were to contact me about a lawsuit they had been served, I would first review the case and tell them their chances of defense. I would let them know what the case could settle for, and whether the case has a good chance at trial.
At the end of the meeting, depending on the type of case, I would request a retainer for representation. In addition, I would explain that if this case proceeds to trial, it would likely cost upwards of $100,000.
Peter Thiel once suggested that “single-digit millionaires” cannot afford access to legal defense in America. I believe he meant that most people do not have upwards of $100,000 in extra cash for attorney litigation and collection of judgement money.
In general, a person faced with litigation would likely need to spend their savings, liquidate investment brokerage and retirement accounts, and perhaps even sell a vacation home — just to afford the cost of defense.
Legally Structured Asset Protection
No one should be forced to lose their entire life savings due to lawsuit or a series of bad decisions. It is important to take a three-pronged approach to asset protection. One portion should be hard for a creditor to reach, another should be impossible for them to reach, and a final portion should be left available for legitimate creditors and debts.
Attorneys provide their clients with a comprehensive asset protection strategy. This may include:
- LLCs, Corporations, or Other Business Entities
- Use of Domestic Asset Protection Trusts
- Use of Offshore and International Business Entities
- Use of Offshore and International Trusts
- Equity Stripping and Exemption Planning Strategies
When it comes to selecting the right asset protection strategy for your business or your family, you need to educate yourself and speak with a competent and experienced attorney. A little up-front work and expense on an asset protection strategy will save you hundreds of thousands of dollars if you are ever faced with a lawsuit.
If you have questions about the appropriate asset protection strategy for your family or your business, please contact our office at (513) 241-0400 or use our contact form to schedule a time to discuss your legal needs. We look forward to hearing from you!