Asset protection helps you gain leverage against potential legal threats.
People call us interested in setting up an asset protection plan. Or they want to upgrade the plan they already have.
These people have done their research and have spent a lot of time worrying before calling us. They want to know whether this entity or that entity (like an offshore trust or LLC) will withstand the worst imaginable circumstances. This is understandable – you’ve already imagined these worst imaginable circumstances. You are sure that you will go straight from being served a lawsuit to this extreme. You want to get value for the cost of your plan.
What is this “worst imaginable circumstance” that people are imagining? You get sued, you lose the lawsuit, you get a judgement against you, and then a creditor attacks and tears down your asset protection structure. They threaten you with jail time because you won’t “give up the goods.” You are disgraced, your assets are in jeopardy, and you spent all that money on a plan for NOTHING!
But, it’s important to remember that this is not how a legal threat plays out.
The point of setting up a plan is not to sit back with your middle fingers in the air if someone threatens to sue you. You can’t and won’t ignore a lawsuit served upon you. You have to show up and defend the lawsuit. There are so many steps that take place. There is a lot of research and back-and-forth. The long grind of a lawsuit is often what tears people down, in fact.
And you don’t want to go down that long road! The lawyers suing you don’t want to go down the road of challenging and piercing your protective entities. It’s freaking expensive and time consuming. They would rather help their other clients!
We are human. Therefore, we are not immune from the “worst imaginable circumstance” spiral.
We know people think, “Only if [entity] will survive this extreme scenario I’ve dreamt up, will I take action.”
No! This is not the right way to analyze whether or not to take action! It ignores everything in between! This analysis ignores whether there’s a deterrent from people suing you in the first place. It ignores whether your plan motivates people to settle instead of sue.
Asset protection is for gaining leverage
Imagine it’s Thursday evening. You’ve picked up your kid from soccer practice. There’s yelling, the TV is blaring, and some good smells are coming from the kitchen as dinner gets cooked. You’re looking forward to settling down to watch something with your spouse and a glass of wine.
You hear a knock at the door. Who in the world would come knock on your door without texting first? You see a little old lady standing in wait and you wonder if she’s lost or selling something. You think of a plan – you’ll only buy maybe one magazine. No more.
She asks your name and while you’re wondering how she knows you, she shoves a stack of documents in your hand. You’ve been served.
When the shock starts to wear off, you realize that many of the assets you’ve worked hard to get in life are suddenly at risk. Lose this lawsuit and your family’s home and other investments could be taken from you.
That fear is because you know you have no leverage. Your back is against the wall. There is little you can do at that point if you haven’t taken action before the little old lady showed up.
With an asset protection trust in place, you might still feel your heart sink a bit (that’s human). But after that, you have someone you can shoot a quick email off to. You can enjoy that dinner and your evening because you know that you’ve got leverage. You have the power to defend yourself and your family.
In fact, maybe you would not have been served with a lawsuit if you had already had that leverage. Asset protection is for discouraging lawsuits, too.
Here’s a recent example to illustrate the point
A client of ours had a contract dispute due to all the Covid 2020 madness. The other party said to settle this we want agree to what we’ll call Demand A and Demand B. Demand A put my client out $10,000. Demand B would potentially put my client out millions of dollars.
After refusing Demand B, the other party threatened to sue. “We know you have a home with almost $1,000,000 in equity” they said.
As an asset protection attorney, I gleefully imagine the frustration they felt when they discovered this home was in an offshore trust with the client’s children as beneficiaries.
With the leverage of this trust, our client was happy to agree to Demand A, but not to Demand B.
And the other party begrudgingly agreed to Demand A as well.
The parties settled.
Lawsuits were avoided.
Our client kept his family’s home.
This is what asset protection looks like when it works. A $17,500 investment saved a home and the nearly $1,000,000 in current equity.
Statements like “offshore trusts don’t work for US real estate” or “Washington law doesn’t allow for asset protection” aren’t helpful. Asset protection is about leverage.
Had our client gone the route of second-guessing the planning, he and his children might be renting an apartment now.
Colin Ley is an asset protection attorney and the creator of the PREP Trust® and Better LLC™. He is also the co-founder of LayRoots (along with with partner in life & business – Shreya Ley)
Being successful in America makes you a target for bogus lawsuits from shameless lawyers. We created an effective, asset protection solution, so you don’t have to worry anymore, happily knowing your family’s future is protected. Get started now by scheduling a free, 30-minute call at livemorecarefree.com.