I am frequently asked isolated questions about asset protection planning. Should I consider forming a domestic asset protection trust? Do you think I should consolidate some of my real estate holdings in a limited liability company? Should my husband and I transfer joint interest in our residence to my name alone? Etc., etc.
None of these questions can be answered in isolation. They are like pieces of a puzzle that must ultimately be brought together in an overall asset protection strategy.
In order to give meaningful advice, an asset protection attorney must obtain information from you about a variety of matters, including the following:
- Your net worth. While certainly not determinative, net worth affects asset protection planning. If your net worth is $200,000, an offshore trust is far less likely to be a meaningful strategy than if your net worth is $20 million.
- Your specific assets and liabilities. Protecting real estate may involve different considerations than sheltering marketable securities. Your attorney must have at least a general idea of your specific holdings.
- Risk. Are you in an occupation where you face an increased chance of lawsuits (such as a medical doctor or a small business owner)? While any individual of a business can potentially benefit from asset protection planning, some businesses and individuals need planning more than others.
- Fees and expenses. Various asset protection alternatives have different costs. Offshore trusts are a lot more expensive to set up and maintain than most domestic asset protection alternatives. And more expensive alternatives are not always the best choice.
- Family situation. Your marital status, whether or not you have any children, and other personal and family considerations can impact asset protection alternatives.
- The area in which you live. Florida and Texas have great homestead exemptions. Ohio on the other hand has a very low homestead exemption. State laws definitely impact asset protection planning.
- Whether you have any current creditor problems. Once there is a judgment against you, or even a lawsuit filed against you, your alternatives become far more limited. Fraudulent transfer statutes may prohibit moving assets to avoid paying known creditor claims.
While much of the foregoing may seem obvious, I find that many clients do not initially understand why I want to have a good overview of their personal and financial situation before making any specific asset protection recommendations. Various asset protection alternatives are like pieces of a puzzle — they must fit together into an overall strategy in order to be effective.