Attorney Reveals Legal Strategies for Protecting Assets

What exactly is Asset Protection and how do you determine if someone can benefit from it? Asset Protection is really a multidisciplinary approach to strategic planning methods including: Lawsuit Protection, Estate Planning, Privacy Protection, Tax Reduction and Financial Strategies which maximize investment returns while minimizing risk through diversification and asset allocation. Combining all strategies under one roof, so to speak, really helps clients achieve their objectives without consulting several specialists. When clients visit an attorney for a legal opinion or, CPA for a tax opinion and a Financial Advisor for a financial opinion, they sometimes get conflicting information and become thoroughly confused. Not only that, but they probably get three separate invoices in the mail for their time.

Q: Could you be more specific as to what you do for clients and who would need this type of protection?

A: I typically use traditional entities but I add customized unique asset protection attributes. I integrate these entities into a comprehensive strategic plan where each entity serves a special purpose. The basic building blocks includes: Limited Partnerships, Limited Liability Companies, C-Corporations, S-Corporations, Revocable and Irrevocable Trust, Encumbrances, Powers of Appointment and specially drafted contracts and agreements.

Q: You hear so much about IRS these days. Are these strategies legal?

A: Yes, all the entities I create have Tax ID Numbers and are set up in compliance with all Federal and State laws. That is why it is so important to have a CPA involved. There are too many people without the requisite tax background trying to do this type of work. It’s a shame to see a plan fail due to poor tax planning and advice.

Q: Marriage and divorce are important events in people’s lives. Do you recommend any special considerations for clients considering either?

A: Prior to marriage we recommend a Prenuptial Agreement prepared with special asset protection features. During marriage we use a Postnuptial Agreement with detailed provisions protecting wealth. Under California law, we can create legally binding documents that protects both assets and income.

Also, separate property trusts and business structures and contractual arrangements can legally shield Hard Earned Wealth from Unreasonable Divorce Settlements. Of course timing is critical. The earlier we see the client the more effective the plan will be.

Q: How does the new tax law impact your planning strategies?

A: Very much so, Dividend and capital gain rates have been reduced to 15% and ordinary income is still taxed at over 35%. Our planning strategies have been uniquely customized to permit the maximum tax reduction under the new law. At the same time we continue to use traditional tax savings methods such as pension plans and deferred exchanges to further reduces taxable income. This new law others a limited opportunity to take advantage of these tax breaks. Preplanning is still very important for each client we look for possible restructuring of their legal entities and their asset holding and their liquid asset portfolio.

Q: A lot of people wait to the last minutes to do any type of planning. When is the best time to set up your asset protection plan?

A: The earlier the better. The best time to prepare an asset protection plan is prior to any lawsuits or potential claims. Asset protection is like a chain, only as strong as the individual links. Inadequate plans can be overturned and disregarded. If there is a problem lurking, only the most capable and competent Attorney/CPA should be contacted.

Q: Is Asset Protection expensive?

A: Asset Protection is not only for the super wealthy. A very basic asset protection plan can be set up for as little as $1,500 to $4,000. More complex structures can cost $5,000 to $10,000 and up. We try to keep annual costs very low. Some states charge only $50 per year to maintain an entity. Most clients end up saving many times the initial fee the first year. Also future tax benefits and investment returns will usually pay for the plan many times over.