Does Asset Protection really work?
There are those who question whether even the most sophisticated asset protection plan will actually defeat a creditor’s claims, especially where the asset protection plan is designed and implemented prior to a judgment being entered or a lawsuit being filed. Evaluating asset protection effectiveness depends upon having realistic goals and objectives.
If by asset protection a person means becoming completely judgment proof, then successful asset protection is extremely difficult, especially if it is not implemented several years before problems arise. However, if one’s goal is to greatly improve their creditor protection and to place most of their assets beyond creditor attack, then asset protection success is obtainable if done early.
Without asset protection planning, an individual subject to a potential liability or an actual judgment will probably lose all his assets not exempt by the law. But, with professional and advanced asset protection, collection of a judgment can be made very difficult (though never impossible) and the debtor gains substantial power in negotiating a reasonable settlement of a creditor’s claim. Thus, a reasonable goal of domestic or offshore asset protection is putting yourself in a greatly improved bargaining position with future creditors.
Most important of all, hiding either assets or income tax protections are not part of asset protection planning. Nor does effective asset protection involve secreting assets, and no one should ever expect that asset protection reduces U.S. income tax liability.
If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.