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The following is a check list of asset protection tactics and concepts,
categorized but not described. Explanations of many of these tactics are
included in other articles in this web site or in back issues of Global
Asset Protection.
Some of the tactics listed
in this checklist are subject to dispute by different asset protection
advisors. This checkist is not intended to serve as a list of
recommended asset protection devices for any specific person, but as a
reminder of different tactics and devices that are used by different
people at different times. It would be extremely unlikely that any one
person or family would utilize all of these tactics.
Segregate Ownership
and Control of Assets
Insure Against Losses When
Practical
Avoid
Unnecessary Exposure
Avoid
Fraudulent Transfers
Make Gifts to
"Safe" Family Members
Transfer assets to
protected entities
Checklist for Using
Family Limited Partnerships
Checklist for Using A
Controlled Corporation
Checklist for
Offshore Asset Protection Trusts
Segregate Ownership and Control of Assets
Review legal title for all assets
Avoid joint ownership whenever possible
Avoid authorized signatures on personal accounts
Avoid joint liability on loans when possible
Insure Against Losses When Practical
Self insurance (deductible & co-insurance)
Errors & omissions insurance
Product liability
Personal liability umbrella
Foreign captive insurance
Diversify coverage among insurance companies
Make sure companies are among highest rated
Use variable annuity/life insurance contracts when
feasible
Avoid
Unnecessary Exposure
Avoid serving as an inactive corporate officer
Avoid serving as director of a corporation
Avoid general partnership and proprietorship
Check environmental liability on land purchases
Don't rely entirely on one advisor
Don't ignore legal protocols of various entities.
Use multiple entities for maximum protection
Segregate safe assets from high risk assets
Provide mechanism to change trustees of trusts
Dispose of unneeded high risk assets
Avoid loaning property to others who might misuse the
property
Don't agree to serve as an executor or trustee except for
your closest family members
Avoid
Fraudulent Transfers
Measure solvency under state and federal law before making
transfers Exclude all protected assets
Base asset values on fair market value
Include contingent liabilities
Include future income that is available to pay creditors
Avoid gifts when insolvent under applicable law
Avoid gifts after exposure to potential claims unless there
are enough assets or future income to satisfy those claims
Make Gifts to "Safe" Family Members
To spouse if not subject to litigation risk and if there
is no concern over a divorce.
To parents in trust or via FLP
To Children in trust or via FLP
To an Irrevocable trust
To a Qualified Residential Retained Interest trust
Get qualified appraisals for assets not listed on an
exchange
Transfer assets to protected entities
Limited partnership with transferor as L.P.
Closely held corporation (minority interest)
Irrevocable life insurance trust
Offshore asset protection trust
Charitable remainder trust
Family foundation
Checklist for Using Family Limited Partnerships
Don't use FLP to hold only idle or personal assets
Don't combine low risk and high risk assets in the same
FLP
Maximum protection is obtained if highest risk family
member is not the general partner
Greater protection is likely if the FLP has multiple
partners
Consider having L.P. interest owned by a foreign trust
Avoid personal use of FLP assets without compensation to
the FLP
Maintain separate bank accounts for the partnership
Checklist for Using A Controlled Corporation
Avoid more than 49% ownership by one family member
Controlling shareholders, officers & directors should
be covered by adequate liability insurance
Use a FLP or LLC to own and lease critical assets to the
corporation
Avoid personal use of corporate assets without
compensation to the corporation
Maintain separate bank accounts for the corporation
Maintain corporate minute book, stock ledger and by-laws
Minimize the use of employees when possible or isolate
employees from assets in separate legal entity
Segregate unpaid payroll taxes from all other bank
accounts
Avoid personal loan guarantees whenever possible
Withdraw any idle (unneeded) cash or other assets if
possible
Don't use the corporation to accumulate passive
investments
Checklist for Offshore Asset Protection Trusts
Don't put all of your assets into an OAPT
Don't structure the trust to achieve tax benefits
Avoid putting appreciated assets or growth assets into
the offshore trust
The grantor/settlor should not be a trustee
Make the OAPT irrevocable with the grantor as a
discretionary beneficiary rather than a primary beneficiary
The OAPT can be structured as a temporary (reversionary)
trust with a fixed term of years
The settlor/grantor should not be the primary or sole
beneficiary
If the settlor/grantor is a trust protector, his or her
powers should be suspended during periods of duress
Further details about protecting your assets from future lawsuits
are available in our subscriber's web site.
NOTICE: This
Information is intended only for educational purposes and may be
regarded as controversial by some legal experts. Readers should consult
with a qualified professional who is familiar with their specific
financial and tax circumstances before adopting any ideas that are
discussed in this article.
About the author:
Vernon
Jacobs is a CPA who works as a tax author and
consultant. He can be reached by phone at (913)
362-9667.
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financial planning
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