A$$ET PROTECTION:

What is it and how is it done? A$$et protection is nothing more than the employment of various legal and economic strategies designed to protect YOU, YOUR income, and YOUR property from loss.

What types of possible loss do YOU have to fear? This answer can be as numerous as there are people. Most people experience unnecessary loss in one of three major ways. The solutions to these three problem areas often work to minimize loss overall. Specifically, the three spheres of potential loss are, Civil Lawsuits, Divorce, and Unnecessary Tax Payment. Incredible amounts of money and property change hands every year in these three areas.

The consumers of wealth seem to be nearly unlimited in their creativity when it comes to moving property from the producers of wealth. Not only must a large part of YOUR time and money be spent acquiring property, but much time and money must be committed to the preservation and distribution of property as well. Failure to consider the ever present dangers of wealth confiscation will often result in loss of YOUR property, or the inability to acquire any significant amounts of property in the first place.

LAWSUIT MANIA IN AMERICA:

Every fool who has the capacity to pick up a hedge trimmer and trim hedges with it can take YOUR life savings when he mutilates himself in the process, here is how this can effect YOU.

Did YOU sell him the trimmer? It's YOUR fault!

Did YOU rent him the trimmer? It's YOUR fault!

Did YOU loan him the trimmer? It's YOUR fault!

Did YOU manufacture the trimmer? It's YOUR fault!

It is never the fault of the fool. It is YOUR fault for not restraining him.

And what would happen if YOU did try to restrain him? YOU guessed it. Another lawsuit for improper restraint of actions. There is no end to the willingness of the courts and juries to award fools the life savings of those who produce the wealth, those who create the jobs, those who provide the intellectual fuel that drives civilization.

RELYING ON INSURANCE TO PROTECT:

Homeowners insurance, automobile insurance, umbrella liability, malpractice, errors and omissions, the list goes on endlessly. The bottom line is that YOU can't buy enough insurance, nor could YOU afford it if YOU could buy it. And even then, YOU cannot be assured the insurance company will honor YOUR claim or even be in existence when YOUR claim is filed. (48 Insurance Companies become insolvent every year)

Is there an answer? Is there any hope at all? There is, but the tactics and strategies of a$$et protection must be employed now, before the problem has developed. To wait until after the fool has struck is to risk the total loss of a lifetime of savings and investments.

A$$ets moved after the commencement of a suit, or even in anticipation of a suit, generally will be found in violation of the Fraudulent Conveyances Act. However, one may withhold a sufficient amount of a$$ets to thwart any charge of fraudulent conveyance, thus their (the person suing) efforts would be fruitless. Acting before the fact will almost certainly assure YOUR success.

How is it done? In a nutshell, a$$et protection requires the change of property ownership from the name and control of a visible and potentially liable owner (YOU) to the name and control of a low profile or invisible and non-liable owner (A TRUST). What YOU own is subject to confiscation by the court, if YOU do not own there is nothing to take.

Although the danger that is being avoided or the goal that is being sought will modify and direct the specifics in a$$et protection, there are a few basics that prove to be nearly universal in application.

PERSONAL OWNERSHIP:

Property is generally owned in the name of a person or in joint tenancy with another person. Under this form of ownership, YOU are at a maximum risk for loss of YOUR property. When YOU do anything to generate liability, everything YOU own in YOUR name is subject to seizure to satisfy the claims of the court. YOU should own nothing in YOUR name. Everything should be owned by a trust, limited partnership, corporation, LLC, etc. YOUR libelous acts and the judgments resulting are generally not transferable to another person, actual or legal. Own nothing in YOUR own name.

CORPORATE OWNERSHIP:

Most persons think the corporation is a necessity to businessman and helps to minimize personal liability. Many states require more than one officer to serve on a corporation. This often results in the legal advisor placing the husband as president or treasurer, and the wife as vice-president and secretary of the corporation. This results in the existence of two lightening rods if the corporation gets into trouble. Now the litigant can go after the a$$ets of both husband and wife, a very serious and very common problem.

However, if properly structured, it is quite useful in holding ownership to property as well as moving income out of high tax districts to low tax districts, through a method known as "up streaming." In the terms of property ownership, one of the biggest and most serious mistakes a businessman can make is to place property under the ownership of a corporation that has employees or is doing business with the public.

Some states, such as Nevada, do not require two corporate officers, and by incorporating in these states and working in YOUR home state as a foreign (out of state) corporation these problems can be greatly reduced.

However, a corporation that does not do business with the public, does not have employees and does not have any apparent contact with the public can be a very effective owner of property. One way to accomplish this would be for the first corporation, the one doing business with the public, to rent/lease property from the other corporation, the one having no contact whatsoever with the public.

If the first corporation is sued the total a$$ets of the corporation will be required to settle the judgment. But because these a$$ets are virtually zero, no actual loss will occur. The property is actually owned by the second corporation. This corporation did nothing to enraged the client and is not subject to legal redress. As a result, the property and a$$ets of the business remain secure.

Another advantage to this two-corporation structure is the possibility of the second corporation being domiciled in a state that does not have a state income tax. Nevada is the ideal state for this strategy. By paying rent on the property of corporation one to corporation two, the first corporation is able to move (upstream) its income into a no or low corporate income tax district (i.e. Nevada). Very large amounts of money can be saved this way.

THE LIMITED PARTNERSHIP:

The Limited Partnership is a very flexible entity in the area of a$$et protection. The main consideration here is that it is exceedingly rare for a court to penetrate a limited partnership in a lawsuit. In fact, even the I.R.S. generally cannot break open a limited partnership. If a judgment is rendered/ordered by the court, what often happens is that the creditor is given a "charging order."

This means that if and when property is distributed by the partnership, then the person holding the charging order is paid. However, if the partnership never disburses the funds, then the creditor has no right or authority to break into the partnership and collect the judgment.

YOU might question the value of a partnership that never disperses its a$$ets. However, under the very unusual situation as described above, where a charging order exists against one of the partners, it is very important that there be provisions in the partnership that do not require the general partner to disburse these properties, for if the a$$ets are disbursed, then they will by law pass to the creditor or holder of the charging order.

Instead, what YOU want under this unusual situation is for the general partner to have the capacity and legal right not to disburse partnership a$$ets. In addition YOU want a special clause in the partnership that will "indemnify and hold harmless" the general partner for any bad investments or business decisions that would cause loss, partial or in whole, to the partnership.

With this clause in effect, the general partner can systematically move the a$$ets out of the partnership, through bad investments and other poor business decisions, to the point of totally de-capitalizing the partnership and closing it down. The result will be a charging order that goes uncollected and is uncollectible. The partnership's a$$ets are thereby moved into another legal entity which is controlled by the same partners.

Limited Liability Company/s are the new kid on the block concerning entities available for business and a$$et protection. It was just in the last few years that IRS was required to approve LLC’s, and that approval came because so many states had approved LLC’s in their own states which meant state returns would be filed. Of course IRS did not want to be left behind in the area of filing returns.

Each individual state has it’s own LLC Rules and Regulations. However, in general terms a member/partner of an LLC is not liable for the actions of the LLC. Our recommendation is, that if a person has been operating as a sole proprietor a trust be formed and be added as the second member/partner of the LLC. Of course the first partner/member of the LLC is YOU.

Since an LLC is a pass through entity as are Corp, LP, and Trusts we recommend the trust chosen as the second member/partner receive the major amount of any distribution at year end.

TRUSTS:

To avoid personal ownership of a$$ets, trusts have proven to be exceptionally powerful and valuable as protective entities. One of the main considerations, is that it is exceedingly rare for a court and/or others to penetrate a 'trust' involved in a lawsuit, because of the trust indentures protective terms.

There are many kinds of trusts and the situation under consideration will dictate the choice. A few examples to consider:

1) Family Trust (bypass trust) (statutory grantor trust)

2) Children's Trust (2503 "C" trust) (statutory grantor trusts).

3) Contract Trust (Contractual Business) an Unincorporated Organization Constitutionally based Article I Section X US Constitution non grantor non statutory trusts.

An Unincorporated Organization (UO) can own ANY a$$et. By conveying/transferring a$$ets such as real estate, savings accounts, checking accounts, automobiles, antiques, stocks, insurance, business equipment, and/or any other a$$ets into trust, those who would try to seize what at one time were YOUR a$$ets, encounter insurmountable obstacles in obtaining access to those a$$ets. (Grantor constructed trusts have little protection, except for the issue of probate)

However, the constitutionally based Unincorporated Organization (UO) in particular, is very useful and offers complete safety to those who choose it for protection/preservation of a$$ets. A UO can manage investments, own life insurance, and it continues to be a valid instrument even after YOUR death. At YOUR death, there are no estate taxes, and no probate action takes place, as the trust is an artificial person and does not die.

It is not the use of specific tools that defines a$$et protection, it is the specific application, with forethought of how these common tools can be used to protect a person's a$$ets in a hostile environment. It is visualizing the threat to the a$$ets and putting in place methods and tools all legally viable for protection against the hostile efforts of those who have no moral claim to YOUR a$$ets. A$$et protection/preservation pre-supposes the best by preparing for the worst.

OFFSHORE PLANNING

Offshore a$$et protection is considered by some as one of the safest and most effective methods of all. Through the use of many of the tools mentioned above in an offshore (out of the United States) jurisdiction, maximum protection is afforded the client. Where the courts of the U.S. do not have authority/jurisdiction, the confiscation or re-titling of property by these courts is an impossibility. In addition, offshore banking relationships (set up in the right country) have proven to be very private, while at the same time safely maintaining cash and investment instruments far from the hands and knowledge of the insatiably greedy.

The offshore trust and corporation, when properly structured, can be an incredible tool in the growth of capital, as well as being unhampered by U.S. regulations and taxes.

Property in offshore trusts and corporations can be passed to heirs, estate-tax free, if properly structured. Safe deposit boxes, foreign exchange accounts, managed investment accounts and common savings and checking accounts can all be maintained offshore, away from the eyes of those enquiring minds that want to know -- but never will.

And remember, investments that grow tax free in a 33% tax bracket, in effect have a growth rate equal to 1/3 more than the base rate of return. In other words, a 9% nominal rate is really a 12% return with the tax factored out. Over the years this will make an incredible difference in an investment program.

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