Frequently Asked Questions

Based on a Financial Forum interview with Attorney Hillel L. Presser

Why are Asset Protection strategies important?

Our society has become extremely litigious and the rise and fall of financial markets over the last few years has created new dimensions of risk individuals, families and businesses. Bankruptcies are on the rise, foreclosures are at an all-time high and lawsuits are commonplace in even the smallest personal or professional conflict. Asset Protection provides not only legal safeguards—but peace of mind for anyone with financial savings, real estate and investments.

How "out of control" is the litigation problem in the United States?

Until just recently, only the super-rich and celebrities were frequent targets of outrageous lawsuits. But it's not unusual now for fairly ordinary citizens to find themselves embroiled in nasty litigation. And all it takes is one nasty lawsuit to ruin a lifetime of hard work and financial savings. With over 100 million lawsuits filed each year, the average American has a one in four chance of being sued—and that doesn't even include the threats of bankruptcy, foreclosure or business failure, to name just a few of the common causes of catastrophic wealth loss.

So then Asset Protection isn't just for wealthy individuals?

Absolutely not! America's wealthiest families have deep pockets and can typically handle the expense of litigation and even pay off a court award in full. Of course, they are extremely adept at protecting their assets so the likelihood of a huge payout is unlikely. But the average American isn't as financially elastic as the super-rich and typically doesn't have trusts, family corporations or other protective entities to shield their assets like the rich do. As a result, they are at huge risk of losing everything in the event of a major court award against them. That's why we advocate that anyone with even modest wealth explore Asset Protection as a key component of their long-term financial planning.

Many people believe that shielding assets against lawsuits and creditors is unlawful or unethical. What is your position on this common sentiment?

Asset Protection is legal because the courts, state legislators and the United States Congress have passed laws that allow citizens and corporations to protect their interests through a wide range of statutory provisions. Even the American Bar Association has an Asset Protection subcommittee and many prestigious legal journals openly discuss and recommend Asset Protection.

The Asset Protection legal community follows these laws to the letter and as such provides its clients with fully ethical and legal techniques to protect family and corporate wealth.

What is the best way for me to advise my clients?

Knowledge is essential in the practice of Asset Protection. My firm and many others in the same practice area are experienced specialists in the domain and can easily coordinate protection strategies with tax planners, trust lawyers, accountants and other specialists. A good introduction to Asset Protection is advised for every legal practitioner and I recommend that any professional visits GarrettPress.com to see our wide selection of publications on the topic.

How should a married couple own their investments?

It is extremely risky for one spouse to own savings, CDs, stocks bonds, mutual funds and other investments in their individual names—or even jointly—because as such they are vulnerable to attack in the event of a lawsuit or claim. The best way to title these investments is in a protective entity a (unless they are exempt or protected by state or federal law).

Is the family home vulnerable to a lawsuit?

When a home is titled in the name of an individual and that individual is the victim of a lawsuit or legal claim, the family home is at risk. Most Americans believe that they have an automatic "protection" against lawsuits for their home, but this is not accurate and there are many ways that a judgment or lien can be filed by a county recorder and begin an extremely complicated process of defending ownership.

It is important to note that personal ownership may be necessary for conventional bank financing and to claim federal capital gains tax benefits, homestead protection, and real estate tax abatements that are available to seniors, but any homeowner should be aware of the risks of titling a family residence in the names of individuals.

How important is the protection of vacation homes, rentals or commercial properties?

The protection of non-primary residential real estate holdings is different that the "family home" because the Asset Protection community generally wants to preserve the tax benefits and homestead rights of the primary residence. Other forms of real property require special protection because the property owner is responsible for a range of legal threats arising from tenants, tenant's guests, sub lessees, neighborhood associations, contractors and even trespassers.

How can a mid-sized businesses or professional practice take advantage of protective strategies?

We encourage every individual to "lawsuit proof" themselves, but the strategy to protect a business professional is slightly different because they are vulnerable to a different type of lawsuit and creditor risk that the average individual. Unfortunately, many professionals and small business owners do not employ protective techniques and find themselves at tremendous personal risk if a business fails or the business is overwhelmed by legal problems. Entrepreneurs, in their enthusiasm to start an enterprise, often overlook the importance of protecting themselves and can easily expose their partners, investors and family to disastrous consequences. We encourage every business owner to create a defensive strategy against lawsuits and build a multi-layered approach to protecting their enterprise and investment.

Retirement accounts are a major asset of most Americans. What is the best way to protect these from creditors?

In general, it depends on whether the retirement plan is ERISA-qualified or non-qualified. Non-qualified plans include IRA's, Roth IRA's and SEP IRA's. ERISA pension or profit sharing plans are known as "spendthrift trusts" and are protected because the beneficiary cannot gift or encumber the plan's principal or income. This spendthrift provision protects the plan from creditor claims. But not every ERISA pension plan is lawsuit-proof. Technical deficiencies and non-compliance issues could disqualify 401K and similar plans from ERISA protection. No individual should assume that their retirement plan is protected and an Asset Protection lawyer or plan administrator should provide advice on the vulnerability of any retirement program.

Should an estate plan be part of an Asset Protection plan?

We believe that it is important to coordinate an estate plan with an Asset Protection plan to protect heirs and to avoid issues related to an ex-spouse or the creditors of children. There also may be tax advantages to such planning. Individuals with our without significant wealth must plan how their assets should be distributed after their death and consider the best ways to provide financial security for their family and heirs—who, by the way—should also have a strategy to protect their inheritance.

Are there other assets that need protection that are frequently overlooked?

Bank accounts, wage income, life insurance, jewelry, vehicles, intellectual property and even money due from others are assets that are frequently overlooked and must be protected because they are all vulnerable to loss in a legal claim. Each state has exemption laws, which are important to understand, but assets that are not exempt may be subject to claim unless they are protected by being placed into a protective entity, encumbered by a lien, or included in another protective strategy.

CHOOSE THE RIGHT ASSET PROTECTION ATTORNEY!