Principle #1: Layer Your Firewalls
The Presser Law Firm, P.A. protection plans don't necessarily use only
one firewall to protect a particular asset. No matter how safe or defensible
the particular firewall, there's some possibility someone can pierce
it. So we layer protection using multiple firewalls. This is 'belt-and–suspenders'
protection. If one firewall fails, others are behind it. We can always
add more firewalls, if necessary. The challenge is to know
which firewalls to use, and
when to add firewalls against an advancing creditor threat. Asset protection
plans often evolve in stages. We start with a
preventative plan and go to a
crisis plan only as a creditor threat becomes more imminent.
Plan before you incur a liability and you should need only a good preventative
plan. It won't necessarily be your final plan if you are later sued,
as we add firewalls that would most protect you in your situation.
Since crisis plans are usually more costly and complex than basic plans,
we layer firewalls only after a specific legal threat arises. Until we
identify a specific legal threat, it is impossible to prescribe the one
best defense. How The Presser Law Firm, P.A. protects assets is greatly
influenced by the amount and nature of the claim, the case dynamics, what
that specific creditor will likely do to seize assets and many other factors.
But we start with a cost-efficient, simple plan. Not everyone gets sued.
Not every lawsuit is wealth-threatening. A serious lawsuit may be fully
covered by your insurance. Or your lawsuit may be quickly and favorably
settled. Layering firewalls then proceeds in lockstep with the threat
if you over-build your plan prematurely, and you lose flexibility.
Ultimately, your plan must give you the greatest safety. No plan is 100
percent guaranteed. If you have no legal problems (or only a possible
legal problem), then you want to know what your final plan would be if
it's necessary. You'll want to know which firewalls we will use,
when we would add each, and how and why each firewall will function to
insulate your assets. When you fully understand your plan, you'll
sleep more soundly.
Principle #2: Diversify Your Assets
Deploy your assets into different protective baskets. Diversification is
sound planning. Never put your eggs into one basket. Force a creditor
to pursue your assets dispersed in different directions and protected
by different entities. A multi-pronged effort severely handicaps the creditor.
A creditor, who manages to recover assets from one basket, must still
go after the other baskets. Diversification is particularly important
when protecting significant wealth. Each 'basket' can be quite
dissimilar to the others. Combining layering (or defense-in-depth) with
diversification creates an exceptionally strong shield and insurmountable
obstacle to even the most determined creditor. That's The Presser
Law Firm, P.A. objective.
Principle #3: Adopt Counter Offensive Strategies
The old axiom, "The best defense is a good offense" applies to
asset protection. The Presser Law Firm, P.A. has a number of ways to impose
liability on a creditor pursuing assets. For instance, a creditor who
obtains a charging order against a limited partnership or LLC interest
can incur the debtor's tax liability and/or, we can make a creditor
who sues a Nevis LLC or trust post a $25,000 bond. Other liabilities can
be imposed on a creditor. Quills work for a porcupine. You want your own
quills when a predator pursues you. Our planning adds these features to
our plan. A creditor must have a downside or risk by pursuing your wealth.
Rule #4: Customize Your Plan
What should be apparent is that there is no one perfect firewall, strategy
or plan. We customize your plan to your specific situation. The Presser
Law Firm, P.A. has no one-size-fits-all plan. We don't agree with
asset protection planners who peddle that 'one quick fix' or 'magic
bullet' protection. A planner may push Nevada corporations, or international
trusts, or limited partnerships. These can be effective firewalls. But are they
your right firewall?
Your asset protection planner must give you the widest range of firewall
options, because each firewall is only one more tool. Since no single
firewall can be
everybody's lawsuit-proofing solution, your planner must expertly use every possible
protective device. For instance, some planners don't use both international
and domestic (U.S.-based) protective strategies. But, you may need
both a domestic and international plan. Can your planner skillfully provide
both? Few planners do. Other planners protect specific assets –
usually for self-serving reasons. Insurance professionals (as asset protection
specialists) sell accounts receivable factoring programs to protect receivables
from lawsuits. The accounts receivable finances a life insurance policy
and the planner earns a commission. But does this make sense for you?
Perhaps. But even when it shelters your receivables, will this plan protect your
Your planner must expertly apply the complete arsenal of protective firewalls.
Anything less reduces your options and weakens your safety net. Customize
your right plan. To do so, your planner must consider many important factors
unique to you and your situation:
- Your state laws
- The specific assets you must protect; and their value
- What liability (if any) you need protection against
- Whether you are in the preventative or crisis planning stage
- Your financial (estate planning, investment and tax) situation
- The strategies that you would be most comfortable adopting
- Your personal situation (age, marital status, etc.)
When The Presser Law Firm, P.A. expertly blends these and other considerations,
you'll have your customized perfect plan.
Principle #5: Update Your Protection
Good asset protection must also be a continuous process. You may rush to
protect yourself once you are sued or anticipate a lawsuit; however, once
the threat passes, your plan falls into disuse. That happens and it can
be a costly mistake. Your asset protection plan is only your best plan
when it was designed. Time changes your finances, obligations and personal
affairs. Laws, available strategies and firewalls also change. Any one
change may significantly alter your asset protection plan. So, review
your plan annually and with each major event (windfall inheritance, threatened
lawsuit, relocation to another state, family change and so forth). The
Presser Law Firm, P.A. offers our clients an annual review to insure they
remain well protected.
Principle #6: Protect Every Asset (With One Exception)
An asset protection plan should insulate every important asset, but more
than a few plans fail in this regard – they shelter only certain
assets and others remain exposed. You may overlook and bring to the planner's
attention such assets as intangibles (copyrights, patents, notes receivable,
claims against others, etc.). Some assets are exempt or self-protected
and a planner therefore takes no further steps towards their protection.
However, some "exempt" assets are not protected against all
creditors, are not protected to their full value, or are assumed to be
protected when they are not. Never assume an asset is protected –
your advisor should confirm the protection of
every asset. Nor should one think only in terms of protecting only
personal assets. If you own a business or personal practice, its assets also must
Principle #7: Start With a Flexible Plan
No one plan is equally effective against every potential claimant. Asset
protection is like football; you need the right defensive line to block
a particular offensive line. For example, protecting assets against a
routine civil lawsuit would likely involve a far different strategy than
what you need to maximize protection against divorce. How you might protect
your assets against a small nuisance lawsuit would logically bear little
similarity to where a powerful litigant chased a significant claim.
First and foremost, your plan must best protect you from any known or imminent
threat; the danger that probably prompted you to seek asset protection
in the first instance. Beyond that, you cannot always foresee future troubles,
so a good preventative plan should give the foundation of
basic protection. From there you add the specific firewalls to counteract each
specific threat as they occur. This requires flexibility so that your
plan can be easily built upon or modified to meet future situations; also,
it is important to understand the limitations of any particular plan and
to modify the plan as necessary whenever a new threat appears.
Principle #8: Keep it 100% Legal
Not too many years ago attorneys questioned the ethics and legality of
asset protection – that has changed. No lawyer would today question
the legality of asset protection planning and fewer would question its
Nevertheless, there can be a grey area between legal and illegal asset
protection. A good planner will not rely solely upon privacy, help a client
conceal assets fraudulently, implement a plan that may require one to
commit perjury, violate laws, money launder, commit bankruptcy fraud,
or otherwise defraud creditors. That's not good asset protection!
You want legal protection, not 'protective' strategies that can
only get you into even bigger trouble. If there's something questionable
about any proposed plan, seek the advice of qualified legal counsel. There
are many perfectly legitimate ways to shield wealth without resorting
to questionable practices.
Principle #9: Keep it as Simple as Possible!
Some planners see complexity as the hallmark of a great plan — we
don't, necessarily. Although the factors that lead us to choose one
strategy over another may be complex, the implementation and maintenance
of the plan itself should usually be relatively straightforward. Whenever
possible, simplicity is better. Over-planning is a chronic planning mistake.
While layering multiple firewalls is necessary during times of duress,
we can frequently accomplish an equal or even superior plan with less
complexity! More importantly, you and your advisor will better understand
and maintain it. There are many simple ways to protect an asset –
exemption planning and equity stripping (encumbering the equity in your
assets) are highly effective examples. The goal is not to trade safety
for simplicity; but to choose simplicity when a more complex plan gives
you only comparable protection.
Above all, you must be able to fully understand their plan. Regardless
of its complexity, your advisor should be able to explain the function
of each component. If you cannot understand your plan, it is far too complex!
Principle #10: Keep it Cost-Effective
Cost is always important to the design of an asset protection plan. You
don't want to spend more than absolutely necessary to obtain protection.
So, economy and simplicity go hand-in-hand. On the other hand, you do
not want false economy only to end up with a faulty plan. There are many
good, low cost alternatives to more expensive structures and strategies.
Cost, of course, is a function of both what plan is implemented and who
the planner is. While a client may comparison shop different planners,
it may be difficult to make accurate comparisons.
The lower the price may be, the less of a bargain it could become. Is an
international company organized by an international incorporation service
really the best option? Are you simply buying protective entities or the
expertise to know what structures and strategies should come together
as an optimal plan? Again, the artistry metaphor; you need more than colors
on a palette to create a fine painting – you must know how to apply them.
Principle #11: Integrate your Plan with Other Financial Goals
Asset protection is one important financial goal; it is not your
only financial goal. Estate planning, and investment planning (which includes
retirement planning) goals are also important. These four financial goals
must fit together into one well-coordinated, integrated plan!
Principle #12: Contain Liability
Asset protection must do more than protect your assets from creditors.
It is equally important for the plan to
contain liability or insulate you personally from business and other external liabilities
and limit creditors to one (or the fewest number of entities). Essentially,
this strategy deploys assets in different baskets so a creditor can target
the least amount of assets. For example, a plan that shelters a business
owner's personal assets is incomplete unless the plan simultaneously
contains or limits creditors to the assets of the specific business entities.
Principle #13: Your Plan Must Work!
Everything else is meaningless if your plan fails to achieve its primary
purpose – to protect your assets. No planner can guarantee the absolute
safety of their plan (and you should be wary of any planner who does);
however, you want at least reasonable certainty that your assets can sustain
a creditor attack, should it occur. Ultimately, you want your assets as
close to 100 percent lawsuit-proof as legally possible. Anything less is
not a great plan.
YES, YOU CAN LOSE EVERYTHING!
You may think that your wealth is safe and that you don't need protection.
But don't delude yourself and accept reality — for every 60 minutes you spend making money, spend 60 seconds thinking
about how to protect it!