Greenspoon Marder International Wealth & Asset Planning: Asset Protection Planning: Dispelling the Myths

International Wealth & Asset Planning Blog Apr 12, 2019 Denver, CO

As professionals and clients become more educated through symposiums, articles and other publications, the general public is becoming more in tune to the debunking of the old days’ misperceptions that asset protection planning somehow implicates: (1) the engaging in a “fraudulent” transfer of assets to far away locations at a time that a creditor is about to descend; (2) the hiding of assets in secret locations and under fictitious owners’ names; and (3) income tax dodging and not reporting to the IRS the existence of taxable income or reportable assets.

Today, 17 states have passed asset protection trust legislation that specifically allows for protective trusts to be created, following the lead of many offshore jurisdictions. This spreading trend demonstrates that this type of planning is becoming well accepted, if not mainstream, which attracts a climbing number of would-be victims to engage in proactive asset protection planning. In essence, the key factual components to such planning today involves: (1) the repositioning of how assets are owned in advance of the threat of a lawsuit, which has proven to work well to protect assets, even with real estate; (2) the fact that clients have become comfortable with gifting a desired level of assets to a trust that is managed by an independent trustee who must act in the best interests of the client as a beneficiary (if that is part of the client’s chosen design of the trust), meaning the client can still financially benefit from the trust’s assets; and (3) the fact that the client can continue to manage (control) the assets (for example (i) as the manager of an LLC that owns the assets, although the trust owns the LLC, and (ii) as a powerholder over trust assets to redirect where the assets are distributed).

In essence, the designing of structures that import the laws of more protective offshore or onshore jurisdictions has allowed these more protective laws to shield assets from enforcement of actions that arise, for example, in less protective jurisdictions.

It should be emphasized however that retaining any of the controls mentioned above could weaken the asset protection. For example, if you serve as a general partner or manager of an entity (e.g., limited partnership, LLC) you should consider discussing with the trustee the wisdom of gifting those entities to other family-members and/or stepping down with regard to having such management control.

About Greenspoon Marder

Greenspoon Marder is a national full-service business law firm with over 200 attorneys and offices across the United States. We are ranked among American Lawyer’s Am Law 200, as one of the top law firms in the U.S. since 2015. Our firm was founded with the goal of providing the highest quality legal services at the highest value for our clients. Each of our clients is unique and so are their legal needs. We believe no one size fits all for professional services. Our lawyers offer flexible and creative solutions to meet our clients’ respective needs. Our mission is to understand the challenges our clients face, build collaborative relationships and craft solutions with a focus on strategic goals.

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This Greenspoon Marder LLP Client Alert is issued for informational purposes only and is not intended to be construed or used as general legal advice nor a solicitation of any type. Please contact the author(s) or your Greenspoon Marder LLP contact if you have any questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer’s legal qualifications and experience.

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