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The Gilbert Law Office provides asset protection services, and promises New York skills for Buffalo bills.
Our Phone: 716-222-0062 : brendan@assetprotecting.com

No doubt you have heard of collection agencies and creditors. Did you know that with some planning and some good legal advice, asset protection is possible to stop them from taking your assets?

  Contact us today to learn more about asset protection
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Not sure you need asset protection planning? Expand your response of why not below to learn more:

I don't have enough assets or net worth to protect.

In our opinion, assets and net worth are relative. Think of the large assets you own, and ask yourself these two questions:

  1. How long did it take for me to pay for these assets?
  2. How would I feel if a creditor took them, and (depending on the asset) my only alternative to save it is to declare bankruptcy and ruin my credit?

Asset protection planning can allow you to avoid the decision in question #2. A unifying concept in asset protection planning is limiting the remedies a creditor can seek against your assets, such as to a charging order, and which assets if any creditors may seize. Additionally, for the "non-exempt" assets, asset protection planning will prevent creditors from getting to the asset.


I don't have any large assets to worry about losing to a creditor yet, like a house.

This is good news. It means that you can effectively pursue almost any asset protection strategy without having to worry about taxable transfers to the asset protection vehicle you use to own the property.

Planning ahead before ownership—even if the lender for the mortgage requires a personal guarantee or sufficient capitalization for the asset protection vehicle to secure mortgage payment—will cost just a little bit more than the standard closing costs of a home. (As a full-service law office, we can do both the closing and the asset protection planning for you.) The personal guarantee won't set you back any further than if you had inked the mortgage in your own name, instead of the asset protection vehicle you have hold the house for you. And the protection lasts the entire time you (through your asset protection vehicle) own the house. You can even transfer the asset protection vehicle instead of transferring the deed to the property to change ownership.

Think of it as a homeowner's warranty against creditors.


I'm not in danger of owing money to anyone that I can't afford to repay.

This is good news. It means that you can effectively pursue almost any asset protection strategy.

If you wait until you are in danger of being unable to repay the debt, you will find yourself subject to fraudulent transfer laws that exist in every jurisdiction to prevent debtors from protecting their assets from creditors. When creditors win suits against debtors who fraudulently transfer property to evade a debt in New York, they even get an additional debt to take from the debtor—the creditor's attorney's fees in suing the debtor because of the transfer.

Additionally, getting an asset protection plan in place now means that any creditors will have to navigate the plans you have made—and pay their counsel a high rate to act as their tour guide. The frustration of doing so might convince the creditor to settle or abandon their claim against you entirely.

Waiting and trying to protect the asset in the future might result in civil and criminal liability for fraud. It is because of this that we strongly recommend you consult us for creating and planning an asset protection strategy today.


I don't do anything that puts me at risk of being sued. So why bother?

With the current glut of lawyers and the expansion of ways for plaintiffs to recover, you don't have to do anything.

Simply being in America puts you at greater risk of being sued than anything else.

  1. America has approximately 1,200,000 lawyers; 70% of the entire world's. China, with 5 times America's population, had 110,000 in 2002.
  2. American law students? Approximately 130,000, with nearly 40,000 graduating every year.
  3. Your chance of being sued this year? 1 in 5; but 1 in 3 if you are a professional or business owner.

The cost–benefit for a lawsuit weighs far in favor of the plaintiff. With contingency lawyers, a plaintiff is only out a few hours of their time and court filing fees (if the lawyer doesn't provide them). If the plaintiff is successful, however, he or she gets winnings based on how sympathetic they are. Worse yet, if the plaintiff doubts success, they simply seek to settle and extort as much as possible. Hardly any defense attorneys can take work on a contingency basis, because the desired result is dismissal of the plaintiff's case, not a recovery from the plaintiff.

Much attention is focused on so-called frivolous lawsuits. Under ethical rules and most if not all state's rules, lawyers are prohibited from bringing frivolous lawsuits, but the definition is different from the popular definition. Having more lawyers means a higher probability that a frivolous lawsuit (in the popular definition) will be brought. You don't have to do anything wrong to be sued and forced to pay to defend yourself.

An asset protection plan shifts the costs to collect back onto the plaintiff. The plan won't win a lawsuit that's in progress for you—but it will discourage contingent lawyers and plaintiffs from bringing them, which is a victory in and of itself.


I'm already insured. Isn't this enough?

No.

Insurance companies go bankrupt or out of business, leaving insureds uncovered when coverage is needed.

They also have exclusions from coverage and limitations, beyond which you will foot the bill. In some cases, particularly in malpractice, insurance company's counsel may try to convince you that settlement will be interpreted as a concession of liability. From the company's perspective, they are gambling with your chips—if you win, they pay only the costs of defense; if you lose, they are only on the hook to their policy maximum and all the rest of the downside is yours.

Asset protection is not a substitute for insurance, it is a complement. But having an asset protection plan can discourage lawsuits saving you a deductible, and encourage settlement within your insurance policy limits saving you personal liability. It will also allow you to possibly reduce your insurance coverage to save you money directly.


I already protect my business through a limited liability entity such as a corporation or LLC. Isn't this enough?

Regrettably, no.

Firstly, depending on how strictly you adhere to corporate formalities and keep your personal affairs and accounts separate from your corporate affairs and accounts, the legal protection of liability your corporation provides may be disregarded through what is known as "piercing the corporate veil," which applies to corporations as well as LLCs. Effective asset protection strategies require adherence to these formalities.

Secondly, in the event that you are sued personally and insurance is not enough to cover the entire liability—a frequent occurrence in professional entities that lose a malpractice suit, but also quite possible for any business owner—your ownership share of the entity will be used to satisfy the debt. This is particularly possible if you are the sole owner of the LLC, and is true even if the debt you owe is unrelated to your business. If it is a multi-owner LLC, the creditor will have to seek a charging orderand each state's LLC laws vary in what is required for a creditor to seek a charging order.

This could mean:

  1. A judicially-compelled sale of shares of your corporation, creating a new partner for your business—the person you owe;
  2. Dissolution of the business, including liquidation of assets, for the creditor to get a "cash-out" from your business;
  3. Receivership, whereby the court has someone take control of your business to ensure that the creditor can get their pound of flesh; and/or
  4. Taking all profits of the business until the debt is satisfied (unlike some other income sources, which are garnished only to contribute to payment of the debt).

Businesses at a high risk for plaintiff's lawyers are particularly advised to consider asset protection planning to insulate the high risk business assets. There is a glut of lawyers out there, meaning it is likely that in addition to deserving personal injury plaintiffs, undeserving personal injury plaintiffs will also have a contingency lawyer willing to bring their action against your business.

Figures from 2003 showed: A new lawsuit is filed every 2 seconds in America, and 9 out of 10 lawsuits in the world are brought in America. 15 million per year, which is just under one lawsuit for every 20 people living in America. And that was before the "Great Recession." Contingent lawyers usually demand jury trials, and as a business owner the jury won't likely be one "of your peers." If the plaintiff is poor, they will find a way to redistribute the wealth.

A asset protection plan will discourage lawsuits in the first place, because plaintiff's attorneys know the amount of work that would have to be done to collect their contingent fee.

An asset protection strategy and asset protection planning can mitigate these risks and encourage settlement within your insurance coverage, likely saving your business from bankruptcy.


I already use a partnership for my family members who own a portion of the family business or a portion of my investment properties. Isn't this enough?

Again, regrettably no in most circumstances. In fact, depending on the type of partnership, it may increase the risk!

A general partnership will be responsible for any of the partner's debts. If you hold your business in a partnership with your wife and two children, the debts owed by your wife and children could have the entire partnership attached as property that can be used to pay for the debt.

A limited partnership still conveys an asset, namely the ownership interest, to the limited partners. This interest may be able to be attached to satisfy a debt, or have the transfer of the interest forced by the court.

A family limited partnership is no different from a limited partnership above, other than the hope that only family members will be owners of the partnership. (But, as above, the court might force you to transfer part of the ownership to a stranger!)

Both family limited and regular limited partnerships require careful drafting of the Partnership Agreement to protect against these risks. Good asset protection planning and asset protection strategies provide this protection.


I already use a trust to hold some of my property. Isn't this enough?

Again, regrettably no in most circumstances. It depends on the type of trust—all of them behave differently, and there are dozens of varieties.

An irrevocable trust is among the strongest in resisting creditors. They have the effect of making the person who creates the trust no longer own the asset put into the trust. These are an effective part of an asset protection strategy or asset protection plan.

For tax purposes, you may use the unfortunately named "Crummey" trust to hold property for your child until a certain age. Unfortunately, the Crummey trust is revocable and thus a creditor can go to court to force you to revoke it.

A general partnership will be responsible for any of the partner's debts. If you hold your business in a partnership with your wife and two children, the debts owed by your wife and children could have the entire partnership attached as property that can be used to pay for the debt.


I already spent a lot of time and money with an estate planner. Isn't this enough?

Perhaps. Is it worth taking the following risks?

  1. Are any trusts used in your estate planning "living trusts" that aren't "irrevocable trusts?" There are several types of trusts, but living trusts are almost always ineffective at protecting assets. Estate planners usually use these to escape the process of probate for certain assets, but living trusts are ineffective at asset protection. Good news, though: trusts that offer asset protection also escape the process of probate!
  2. Has it been more than 5 years since you planned? Have your assets changed or your intended distribution of them changed?
  3. Did your estate planner consider all of the above issues and decisions while creating your asset protection strategy? Did your estate planner seek your input on which method you prefer?
  4. Is the asset protection plan tailored for your needs? There is no one-size-fits-all package.
  5. Do you understand your asset protection planning well enough to talk about it? Did your estate planner teach you enough about your asset protection strategy? Did he or she answer your questions?

We are here to answer your questions and create an asset protection plan that fits your needs.


Why use an attorney over (my accountant/my financial advisor/my uncle)?

Attorneys are the only ones with whom you will receive attorney–client privilege. And in this area, it is important. Example:

Creditor Counsel: "Under penalty of perjury, with whom if anyone did you discuss your plan to put all of these assets into this LLC?"
Debtor: "(My accountant/my financial advisor/my uncle)."

Creditor Counsel now puts your accountant/your financial advisor/your uncle through a deposition, or calls them to the stand.

Creditor Counsel: "Please describe all conversations you have had with Debtor regarding the creation, formation, and contribution of assets to this LLC."
Accountant/Financial Advisor/Uncle: "Debtor asked me to help protect his assets from your client."

Compare that to:

Creditor Counsel: "Under penalty of perjury, with whom if anyone did you discuss your plan to put all of these assets into this LLC?"
Debtor: "My attorney."

Creditor Counsel now puts your accountant/your financial advisor/your uncle through a deposition, or calls them to the stand.

Creditor Counsel: "Please describe all conversations you have had with Debtor regarding the creation, formation, and contribution of assets to this LLC."
Your counsel either objects to this and is sustained, or...
Attorney: "I refuse. All of the above is covered by attorney–client privilege."

Although asset protection planning is entirely legal, if it becomes manifestly clear (as it will when your advisor is forced to disclose all conversations between you and them) that your intent is to defraud creditors, all of the protection planning in the country will be unable to save you. You'll have to either pack your bags permanently or expect a trip to the cleaners or federal prison, depending on the creditor.

Can I work with you even if you are not an attorney in my state?

Yes. However, it is strongly recommended that you have an attorney in your state associate with me, which most attorneys are very willing to do. I am always happy, and personally prefer, to work as part of your team to achieve a plan that's just right for you. For several states, I can refer you to an attorney in that state that can associate with me to develop your plan.


To learn more about asset protection:

When should I consider starting or revising my asset protection planning?

Hopefully, your parents will start protecting your assets before you are born, for instance, through tax-deferred or tax-advantaged education accounts.

Aside from that, the rule of thumb is: if you have something to lose or if there's someone out there who could sue you, the time to plan is now.

Here is a checklist of good times to begin asset protection planning to get the most out of it:

  1. Before getting credit cards or signing a lease;
  2. Before buying a car;
  3. Before buying a home, condominium or real estate;
  4. Before entering a business deal;
  5. Before marriage;
  6. Before divorce;
  7. Before considering bankruptcy;
  8. Before transferring property to family members;
  9. During the gestation of your child, and with every addition to the family thereafter
  10. At retirement; and
  11. Every three years at a minimum to account for changes in the law or assets.

We are here to answer your questions and create an asset protection plan that fits your needs.

What is the goal of asset protection planning?

To own nothing but control everything.

The reasoning: if you own it, it can be taken from you under the law. Control, on the other hand, usually cannot be taken from you if done correctly under the law.

Therefore, asset planning will feature concepts such as:

  1. Equity Stripping (explained at left)—to reduce actual ownership of the asset by freeing up the equity inside of it, reducing the value to someone who wants to take it through the law;
  2. Limited Liability Entities (see LLCs, LPs & FLPs at left)—to maintain control but segregate assets from the others that you own (or preferably, the others that you control);
  3. Irrevocable Trusts (see All About Trusts at left)—to give up ownership of an asset by putting it in a trust for your family, so that a creditor does not have the right to get to the asset under the law.

Effective asset protection planning won't win the lawsuit. The lawsuit is just the beginning. Asset protection planning wins the collections battle, forcing a plaintiff to wait years and pay tens of thousands in fees to collect their judgment, or to settle now for cents on the dollar. We are here to help you attain this goal.

Couldn't I just gift the assets to someone?

You can, but you will lose any control over the asset. Effective asset protection planning will allow you to control the asset. Additionally, gifts made are subject to being disregarded as fraudulent transfers.

Is asset protection planning a substitute for insurance?

No. But unlike insurance companies, your asset protection plan will never go out of business, or reject your claim based on an exclusion or limitation of coverage.

It is best to carry insurance that is complementary to your asset protection plan. Your liability coverage could be reduced to an amount needed to pay for defense representation.

Asset protection is a deterrent to going beyond your insurance coverage—this way a plaintiff is likely to settle within your insurance coverage bounds, because trying to get personal assets tied up in an asset protection plan is like pulling teeth.

Will asset protection reduce my personal or business income taxes?

No. Anyone who claims that asset protection planning does is offering you criminal liability.

But it will reduce gift and estate taxes in almost every circumstance, possibly avoiding them all together. In some circumstances, it can also legally apportion income tax between family members who are in a lower tax bracket, resulting in tax savings in the aggregate.

What about my offshore accounts; can't I use them to hide money?

Not without committing perjury. There are legitimate offshore uses in asset protection, but using offshore accounts to hide money is not one of them.

After losing a lawsuit, you will be subject to a debtor's examination to find the extent of your assets to pay the judgment. Any accounts over $10,000 anywhere must be disclosed. Although the US court will not have jurisdiction to compel the surrender of foreign accounts, the creditor will be able to go there to pursue them.

What transfers are "fraudulent transfers?"

Each state varies. The first statute defining them is ancient English common law from the 1500s, which has been overridden or superseded by current law and caselaw. However, there are some bright-line rules, and also the Uniform Fraudulent Transfer Act (UFTA), adopted in nearly every state (but not New York, which has its own fraudulent conveyances law at Article 10 of the Debtor Creditor Law, which is largely a codification of the older Uniform Fraudulent Conveyances Act of 1918). The UFTA provides guidance:

  1. A fraudulent transfer is one meant to "hinder, delay or defraud" creditors.
  2. There exist badges of fraud, which are very strong indicators that the transfer is fraudulent. These include transfers, among others, that:
    1. to family members, even through a third-party lienor;
    2. after debtor is sued;
    3. to conceal assets;
    4. without consideration;
    5. where the debtor retains possession;
    6. that make the debtor insolvent or insolvent shortly after transfer; or
    7. of all the non-exempt assets of the debtor.

The Acts make such fraudulent transfers voidable, which means a creditor can have a court compel you to set aside the transfer.