A creditor can only take your assets away by first winning a lawsuit and obtaining a judgment. You may also need to be concerned about pre-judgment attachments and should ask your attorney or advisor is this is a possibility. A judgment is the award for damages after the damages have been proven.
Planning in the U.S. should be completed long before any potential creditor attack. It is certainly worth looking into options, if you do have a current attack, but planning will most likely be limited or not available.
Key Number 2
Judgment creditors can only get what you have. If you do not actually own something, they cannot take it! It seems simple, but so is the law of gravity. As simple as it is, it has profound impact on how most asset protection techniques work.
Key Number 3
Each state has it own set laws regarding what a creditor could potentially attack and eventually gain control over. Each asset needs a careful review.
Key Number 4
Asset protection strategies are best implemented when the financial seas are calm. Once attacks are mounted, it may be too late to do any serious protecting.
Key Number 5
A creditor has to find the judgment and determine that it is worthwhile and cost effective to garnish or take it. If it is difficult to discover and then even more difficult to attach to, as in “possession”, a creditor may settle out of court and in general become more reasonable.
The other import aspect is visibility; stealth works. Flashy cars, houses, cash accounts are easily discovered and this starts the pursuit during the judgment process. However, a good asset protection plan relies on technology and the use of the laws that are in place to grant protection that is bestowed to citizens.
Key Number 6
When it comes to your money, never trust anybody, especially a foreign trust company. All asset protection plans should be structured so that you are never vulnerable to any person.
Key Number 7
Divide and conquer. Never mix liability-generating assets in the same entity. For example, you would never have two apartment houses owned by the same limited partnership, or you would never mix an apartment house with your securities account. Always divide and conquer.
Key Number 8
Asset protection and Bankruptcy generally do mix, something like oil and water. Ask your planner if the plan you going with will hold up in bankruptcy. You may think you would NEVER go into bankruptcy, however it does not take much for creditors to put you into involuntary bankruptcy.
Key Number 9
Finally, the U.S. is the only country in the world that permits and encourages contingency litigation. In most other countries, it is unethical for an attorney to take a case on a contingency basis. There are very few exceptions to this. In addition, most countries will force somebody attacking your assets abroad to post cash with the court to handle the fees and costs and if the defendant is successful, it then given to the defendant.
Financial Risk Analysis
Investments Too Risky?
It’s tough to determine which investments to use if you don’t know your own risk tolerance.