- Avoid Scams
- The Right Asset Protection Professional
Finding the right asset protection planner is vital.
Trusts are often the crux of an asset protection plan, and with good reason. They allow the creation of a separate entity with unparalleled flexibility to accomplish the transfer of property and wealth, often with tax advantages to alternative methods like estate probate or outright gifts, as well as creditor protection if properly drafted.
I've read about other trusts and heard several names. Why don't you talk about them?
We take a conservative approach to asset protection planning. Some of the trusts discussed on the internet and in seminars are peddled by snake oil salesmen—right down to having shills in the audience at seminars rush toward the stage to buy an asset protection "system" or "kit." These planner-scammers are often long gone, either out-of-the-country or in prison, by the time creditors test your plan and punch through it leaving you broke or bankrupt.
Here are a few indications of trust myths and planner-scammers:
- "The Pure Trust." Pure hogwash; usually marketed with the claim that it is based on the US Constitution's use of "obligation of contracts." Despite being roundly rejected by every state and every court, promoters continue to claim (until chased out of town) it will save you income taxes and protect assets in the trust from creditors, the trust does not exist and therefore will only get you smacked with tax evasion and allow the creditors to have free rein. Just ask Wesley Snipes.
Aliases: "Unincorporated Business Trust;" "Constitutional Trust;" "Final Trust;" "Common Law Trust."
Exception: "Irrevocable Pure Grantor Trust," a term coined by David J. Zumpano in a Syracuse Law Review article to distinguish a grantor trust for both income tax and estate tax purposes from an intentionally-defective grantor trust, made solely for income tax purposes but defective for estate taxes.
- Planners who claim to "have had their lives ruined by the IRS," burned by other trusts, etc. and have then created the PERFECT trust, all available for the low price of $X,X95.
Truth: There are several of these out there who will happily ruin your life or get you sent to prison given the chance. They'll expect payment in full up front.
- Planners who focus their plan around secrecy, especially offshore accounts to avoid income tax.
Truth: Income tax cannot be avoided by any trust, only apportioned. Secrecy is only an effective means of protecting wealth if you want to commit perjury or flee the United States for somewhere without extradition to evade your creditors, because you must assume that in the course of litigation all particulars of an asset protection plan will be disclosed. An asset protection planner shouldn't be your permanent vacation planner as well.
- Weekend classes to become "certified" asset protection consultants.
Truth: These "seminars" typically are more like multi-level marketing/pyramid/Ponzi schemes perpetrated to snare the gullible.
We are aware of no reputable national certifications focusing in asset protection.
There is no required designation, course of study, or program to become an asset protection "expert;" most qualified planners instead come from a few vocations and then self-study or are taught asset protection methodologies and techniques:
- Attorneys. Provide the benefits of attorney–client privilege, independently verifiable credentials by the state(s) that license them and a partially nationally standardized evaluation of competency (even if it is of dubious value) in the form of the bar exam, possible experience with the tax code, protections and ethical requirements of the jurisdiction's code of professional conduct, the ability to represent you in court, including tax court (130,000 are admitted), the ability and available resources to perform independent legal research, the requirement of providing legal services of a reasonably-expected quality and your security of being able to sue them for malpractice if they don't meet this standard. In some states, they are required to carry malpractice insurance or disclose that they do not.
We think attorneys make the best asset protection planners for the reasons above, but then again, we are rather biased.
- Accountants/CPAs. Provide the benefits of verification of credentials by the state(s) that license them, virtually certain experience with the tax code, potentially the ability to represent you in tax court (if the CPA has passed the exam for admission, which has an approximate 10% pass rate and is offered every other year; only 202 non-attorneys have been admitted) and the security of being able to sue them for malpractice if necessary. Very likely requires an attorney to supervise trust creation and advise you on the trust's workings, or risks the unauthorized practice of law. Runs the risk of believing that because they understand the tax effects of an asset protection method, they understand the legal effects as well—occasionally with disasterous results.
- Financial Planners. Provide the benefits of verification of credentials with an institution (often the American College, which is reputable and maintains a wide swath of certifications for planners). May use cookie-cutter trust documents, but would require an attorney to supervise trust creation and advise you on the trust's workings, or risk the unauthorized practice of law. Likely is inclined to use a standardized document, even if it is inappropriate for your circumstances, and may be unable to satisfactorily advise you on whether it is appropriate for you. Well-advised to partner up with an attorney or law office providing services in this area and refer their clients to them for all of the benefits mentioned above.
- Business school graduates, whether MBA or bachelor's. Could be virtually of any quality, perhaps even have a diploma from a sham online university. Knowledge of accounting and law could be as little as one required course in their curriculum or none. Proceed with caution.
- LegalZoom. Provide the claim that their documents have been generated, used or appropriated from attorneys. However, likely provides no meaningful analysis of your situation to the documents they offer, no privilege, and the possibility of disasterous consequences caused by the lack of legal (or any meaningful, really) analysis of the papers they generate. Proceed with extreme caution.
- Common Joes burned by the system, fighting the IRS, or emulating Wesley Snipes. Please don't proceed at all.
If you have been ripped off by any of these trusts or planner-scammers, contact us immediately.
||CPAs||Financial Planners||Business School Grads||Legal Zoom|
|Privilege in all legal matters|
|Privilege in tax matters|
|Tax court representation|
|Requires being admitted to the US Tax Court, which is available to enrolled agents.|
|Requirements to carry malpractice insurance vary by state.|
|Legal research and advice|
|Depends on the individual.|
|Depends on the individual.|