WARNING: There’s a Superhighway Running Straight to Your Assets

When your home is paid for, your investment accounts are pumped up, and your debts are gone, your future is safe, right? Not necessarily… Now, it might be time to think about succession and asset protection.

Easy come, Easy go? No!

Most property owners have very limited protection in place against even the standard threats. These might include personal injury attorneys, litigants, fraudsters, regulators, taxing authorities, business rivals, and even unprincipled family members. Together, let’s refer to the group as “Takers” and discuss their potential pathway to your business and personal assets. Without appropriate asset protection, the pathway is essentially a high-speed superhighway running straight to your unprotected assets, and that’s not good.

What is Asset Protection?

To understand asset protection, you will need a little background information:

First fact: There isn’t really a “perfect” asset protection product or strategy. Anybody who tells you differently is selling something. There is a host of attorneys using creative and brilliant solutions to protect clients and there is a legion of attorneys striving to undercut, dismiss and penetrate those same solutions.

Second fact: Differing jurisdictions have widely varying laws and even the physical location of the asset can be a vital issue. Owner access or control can provide a “tainted string” leading back to the asset…and placing assets completely out of one’s control also creates risk. Those assets can be dragged back to you using a fraudulent transfer statute or be seized from the person or entity that they were transferred to. Frankly, unless you convert your wealth into diamonds and shoot them in a rocket into the sun…somebody, somehow can reach those assets.

Bye, bye!

Third fact: All is not lost. Consider the concept of “diminishing return.” The Takers will only pursue an asset so long as the risk of losing AND the cost (in terms of time and money) is still worth it. In other words, if your defense is strong enough, the Takers will seek an easier path or settlement.

Speed Bumps on the Superhighway

If we utilize the diminishing return concept as the underlying driver for our asset protection plan, then certain strategies and solutions begin to make sense.

First, organize various assets into classes to be certain to apply the correct legal structure to them. For example, interest in a business or commercial real estate is very different from an investment account or a personal residence. The rules for protection are different and don’t always function in an intuitive manner.

Second, be certain to establish and maintain the proper separation of personal and business assets so that the issue of co-mingling cannot be used to penetrate what’s termed the “corporate veil” easily. (For more information, please see my article: https://www.estates-utah.com/post/what-is-a-piercing-the-corporate-veil-action) Additionally, business assets should be separated into different “buckets” to require a potential Taker to face piercing the corporate veil multiple times.

Third, consider carefully your budget and capacity for complexity. Build your “speedbumps” to your comfort level and then seek to manage your risk in an acceptable manner. For example, not everyone wants to disperse assets across multiple jurisdictions or even overseas for comprehensive protection. The cost is one significant factor, but the sheer administrative burden is another that many do not consider until too late.

Can't go fast over these!

Fourth and lastly, utilize insurance to decrease your risk and to provide an “Exit” for potential Takers to turn onto when their attempt to rocket down the superhighway runs afoul of your asset protection planning.

Curry Andrews, Attorney