Legal Methods of Asset Protection
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The Moral Basis For
Asset Protection


Any discussion of asset protection among most lawyers, accountants, lenders or even the general public seems to engender some false assumptions that the purpose is to run up a lot of bills or to borrow a lot of money and then stiff your legitimate creditors. 
First of all, no legitimate asset protection attorney will aid a client in doing anything remotely similar to that because it's an out and out felony for the attorney as well the client.
Secondly, anyone from whom you borrow a substantial amount of money is likely to have a secured claim against assets that are worth more than their claim. Those creditors will get paid. 

Third, any unsecured creditors from whom you buy goods or services can be repaid by you after bankruptcy so that you can retain your credibility and reputation with them. 

Fourth, you should have a reasonable amount of liability insurance with which to adequately compensate anyone who suffers an injury that is caused by you, members of your family or any employees. 

Fifth, if you establish a sound asset protection plan, you most likely won't have to take bankruptcy at all and your legitimate unsecured creditors won't have to suffer any loss. If some ambulance chasing lawyer sues you on behalf of an angry former employee who is willing to commit perjury to get even with you, is it moral for your other creditors to lose the chance of getting repaid because of a preposterous award by a sympathetic jury? 

If you form a partnership with someone else, you are not morally obligated to expose all of your personal wealth to their business related errors or omissions by doing business as general partners. It's not immoral to do business as a LLC or corporation so that you aren't liable personally for the acts of your partners or co-owners.   

The basic purpose of asset protection is to balance the scales of justice in connection with lawsuits that would not only wipe you out but would also wipe out your family. There is no moral basis for leaving your spouse's or parents assets exposed to the claims of your unknown future judgment creditors because of joint ownership.  

If you are concerned about providing for your children's or grand children's college education, there is nothing wrong with taking steps to secure that money by making transfers now in the form of a trust, limited partnership or similar entity. 

To the extent that you do not seek to defraud your present known creditors, there is nothing immoral in placing some of your assets beyond the easy reach of the legal predators in the U.S... who are taking advantage of a dysfunctional legal system where fault is seldom an issue in determining liability. If our legal system regains a moral basis of fairness between the plaintiffs and defendants, then there might be some small grounds to question the morality of asset protection. Until then, self preservation is moral and asset preservation planning is as well. 

There are two kinds of people in this world. 

(1) There are those who argue strenuously that you and everyone else are somehow obligated to sacrifice yourself to the needs of others. They would have you believe you should own all of your property in your own name, with no legal protection, because someday, you might cause some injury to someone. If that were literally true, then the question is whether they are doing the same. And for whom is this great sacrifice being made? Is it for your spouse, your parents, your children or even for someone you actually know? No. The implication is that you are somehow obligated to sacrifice yourself, your family and your employees for the un-specified need of some future unknown person. Of course, there will also be a needy lawyer helping this unknown future person and taking from 1/3 to 40% of the total award. 

(2) The other kind of people believe that self preservation is a moral right. They don't feel any obligation or any guilt if they have provided for their spouse, their children, their parents and indirectly for themselves, leaving some unknown future person to find another lamb for the sacrificial meal. 

Can unscrupulous people use legal methods of asset protection to deprive others of a just claim? Certainly.

Automobiles have provided a great many people with a lot of benefits, but they also kill a lot of people every year. Nuclear energy can be used to produce electricity or bombs. Weapons can be used for self defense or to wage war on women and children. Virtually anything can be abused by those who seek to harm others. The morality of asset protection is based on the purpose to which it's put. Like a gun, it can be used for self defense - only when needed. Or it can be used to harm others. It's not the weapon that's immoral. It's the person who is using it.

    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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