August
18, 2005
By Rob Lambert President,
Asset Protection
Corporation
Dear
Subscriber:
Last
week’s newsletter (which
you can review by clicking
here) dealt with the
initial stages of implementing
a plan: funding. I
pointed out that plans
should only be implemented
when the financial
seas are calm (thus
avoiding a future fraudulent
conveyance claim),
and that Asset Protection
Plans are not static.
Plans change shape
in response to the
external threats faced
by the creator of a
plan.
I
also pointed out that
it was perfectly appropriate
for the client to remain
in control of the protected
assets when the financial
seas are calm. This
flies in the face of
a keystone of all conventional
“Static” Asset Protection
Plans, which is the
belief that the settlor/creator
of a plan should always
abrogate ownership
and control of protected
assets to some foreign
trust company. The
earlier newsletter
made it clear that
this outdated approach
is wrong and dangerous.
In
this newsletter, I
am going to deal with
some of the issues
which allow a settlor/creator
of a plan to safely
move to red alert status.
I must say that I do
agree with the proponents
of Static Asset Protection
who maintain that the
settlor/creator of
an Asset Protection
Trust should not have
control. They are right
if they are focusing
on the period during
which the settlor/creator
of the trust is under
attack. At that time,
and no other, the settlor/creator
is only safe if he/she
does not have any control.
The only problem with
Static Asset Protection
Plans are that they
abrogate control at
an early stage when
this is unnecessary
and unwise.
A
properly configured
Kinetic Asset Protection
Plan is drafted so
that the machinery
to remove the settlor/creator
from control is in
place when the financial
seas are calm, and
when there is no possibility
that a legitimate fraudulent
conveyance claim can
me made. The machinery
requires the protector
to fire the U.S. Trustee,
who is also normally
the settlor/creator.
Note that the settlor/creator
does not resign. A
properly configured
plan has the settlor/creator
doing nothing to move
to red alert status.
The only step which
sometimes needs to
be taken is that the
settlor/creator needs
to be careful to make
sure that a solid protector
is in place. This person
should not be a resident
of the U.S. and ideally
will be a lawyer or
trusted foreign fiduciary.
This foreign protector
should be in place
well before any hint
of creditor attack
comes. Many clients
start with a foreign
person in place as
the protector (by far
the safest approach),
and some decide to
wait until they see
storm clouds brewing
to appoint a foreign protector. I always advise my clients that they should never wait till
the last minute to
appoint a foreign protector
as this can expose
them to a fraudulent
conveyance claim.
Remember,
a solid Kinetic Asset
Protection Trust is
a machine which removes
assets from the reach
of creditors without
the involvement of
the settlor/creator
of the trust. Logic
would lead to the conclusion
that the settlor/creator
would be exposed to
the danger of theft
in this situation.
Well, this is not true.
Next week’s newsletter
will deal with these
issues and how we keep
the settlor/creator
out of harms way and
insulated from any
theft risk. Remember,
one of my key rules
is to “never trust
a foreign trust company”
because you never need
to. Next week will
begin the process of
explaining how this
can be accomplished.
Have
a healthy and protected
week.
Rob
Lambert
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.
