Asset Protection Planning
It is unfortunate, but true: We live in a highly litigious society and people today seem to sue one another over just about anything. Worse, you never really know what a jury might decide, regardless of how frivolous a lawsuit may appear. Even some of the people you love the most may need protection from themselves, such as those who suffer from drug or alcohol dependency, or who lack the maturity to handle a large inheritance on their own. All of this helps explain why Asset Protection Planning is such a rapidly growing area of the law and why it is so important for you to have a plan expertly tailored to your specific needs – particularly if you are a physician, attorney, CPA, business owner, real estate developer, or member of a profession that is subject to an unusually high number of lawsuits.
At Matsen Voorhees LLP, our California asset protection lawyers provide the guidance that individuals, families and owners of closely-held companies need in understanding the risks they face. We then design creative asset protection plans to guard against potential liabilities. With years of experience in all areas of asset protection law, and an extensive network of leading financial professionals world-wide, we are particularly skilled at establishing and managing offshore trusts and corporations. The techniques and strategies we can use to protect your hard-won assets and legacy include:
- Offshore and domestic business entity formation
- Domestic trusts designed to safeguard assets from predators
- Offshore trusts, placing your assets beyond the jurisdiction of U.S. Courts and out of harm’s way
- Equity stripping and asset isolation strategies to minimize the risks posed by potential predators and which ensure your privacy
California Domestic Asset Protection Trust Lawyer
A domestic asset protection trust is any trust that is established to protect your assets from creditors. While usually established in an offshore jurisdiction, the asset protection trust allows the assets to remain in the U.S. under the direct or indirect control of the settlor (the person establishing the trust).
An asset protection trust is usually structured to be:
- Irrevocable for a term of several years
- Treated as domestic grantor trusts for tax purposes
- Returned to the settlor upon termination
The benefits of an asset protection trust include:
- Confidentiality of asset ownership
- Deterrent to litigation
- Protection of otherwise unprotectable assets
For well over a century, individuals in the U.S. have utilized foreign self-settled trusts to protect their assets. Many offshore jurisdictions have either trust enabling legislation or favorable court decisions that provide creditor protection for self-settled trusts. Because of this protection, several offshore jurisdictions have a very substantial trust industry with respect to Foreign Asset Protection Trusts.
Recently, several U.S. states have adopted legislation similar to various offshore jurisdictions. These statutory provisions provide various degrees of Asset Protection for a settlor’s interest as a beneficiary in a self-settled trust. Eleven states have now passed legislation providing for creditor protection to a settlor/beneficiary of an Asset Protection Trust. This phenomenon of Domestic Asset Protection Trust legislation indicates a strong U.S. trend for providing Asset Protection for individuals setting up self-settled trusts.
It should be noted, however, that the courts have not had an opportunity to pass muster on this type of legislation because of its recent enactment and because the statute of limitations in most cases has not expired. Depending on the timeline involved with respect to when the claim has arisen, these trusts can be and should be considered in appropriate circumstances, but only by an California domestic asset protection attorney who understands all of the ramifications.
Asset Protection Limitations – The Fraudulent Transfer Law
The most important limitation and obstacle to Asset Protection Planning is the Fraudulent Transfer Law. This law provides that a debtor cannot transfer assets if the principal reason for the transfer is to prevent present or future creditors from gaining access to these assets. The language of “delaying, hindering, or defrauding” creditors is the basis of setting aside transfers by creditors against debtors. Normally, in order for the transfer to be classified as fraudulent, the transfer involved, when taken into account with the potential amount of the creditor claim, has to make the transferor insolvent. The consequences of the Fraudulent Transfer Law make it imperative that the business owner or professional implement Asset Protection strategies before a creditor claim arises. Once the facts occur which give rise to the creditor claim, planning is much more difficult (although there are still some steps that can be taken in the appropriate circumstances).
If you are a professional or have a business and you need to protect your assets, call our California asset protection attorneys today. Reach Matsen Voorhees LLP at 714-384-6580.