Asset protection

Asset protection (sometimes also referred to as debtor-creditor law) is a set of legal techniques and a body of statutory and common law dealing with protecting assets of individuals and business entities from civil money judgments. The goal of asset protection planning is to insulate assets from claims of creditors without perjury or tax evasion.

Asset protection consists of methods available to protect assets from liabilities arising elsewhere. It should not be confused with limiting liability, which concerns the ability to stop or constrain liability to the asset or activity from which it arises. Assets that are shielded from creditors by law are few (common examples include some home equity, certain retirement plans and interests in LLCs and limited partnerships [and even these are not always unreachable]). Assets that are almost always unreachable are those to which one does not hold legal title. In many cases it is possible to vest legal title to personal assets in a trust, an agent or a nominee, while retaining all the control of the assets. The goal of asset protection is similar to bankruptcy, and the two practice areas go hand-in-hand. When a debtor has none to few assets, the bankruptcy route is preferable. When the debtor has significant assets, asset protection may be the solution.

The four threshold factors that are either expressly or implicitly analyzed in each asset protection case are:

Whilst the aforementioned use of Trusts will be of benefit in a number of cases the question of ownership can still arise, as although legal ownership may have been transferred to the trustees, beneficial ownership may still in many cases lie with the settler of the Trust. A Private Placement Life Insurance contract (PPLI), can provide a greater degree of protection and privacy than most Trusts, and can also be integrated with an existing trust if necessary. Whilst Trusts may not be recognised in many Jurisdictions, Life insurance also has the advantage of being Multi jurisdictional.

PPLI can also add security to cash deposits as they can be legally separated from the assets of a bank to protect against ‘Bail Ins’, this is sometimes referred to as Crisis Deposit Assurance. This is particularly relevant in cases where deposits are held that are higher than the normal Government Deposit Insurance limit (Usually €100,000 in Europe) or for longer term corporate deposits such as uninsured pension or provident funds.

United States federal bankruptcy laws and ERISA laws exempt certain assets from creditors, including certain retirement plans. All fifty states also have laws that exempt certain assets from creditors. These vary from state to state, but they often include exemptions for a certain amount of equity in a personal residence, individual retirement accounts, clothing, or other personal property.

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Wikipedia