Lawsuit and Asset Protection

 || Lawsuit Home || End || Lawsuit Index ||
A Checklist of Asset Protection Strategies

  Segregate Ownership and Control of Assets
Insure Against Losses When Practical
Avoid Unnecessary Exposure
Avoid Fraudulent Transfers
Make Gifts to "Safe" Family Members
Transfer assets to protected entities
Checklist for Using Family Limited Partnerships
Checklist for Using A Controlled Corporation
Checklist for Offshore Asset Protection Trusts
 
 

The following is a check list of asset protection tactics and concepts, categorized but not described. Explanations of many of these tactics are included in other articles in this web site or in back issues of The Jacobs Report on Asset Protection Strategies
 
 

Some of the tactics listed in this checklist are subject to dispute by different asset protection advisors. This checkist is not intended to serve as a list of recommended asset protection devices for any specific person, but as a reminder of different tactics and devices that are used by different people at different times. It would be extremely unlikely that any one person or family would utilize all of these tactics.
 
 

Segregate Ownership and Control of Assets

  • Review legal title for all assets
  • Avoid joint ownership whenever possible
  • Avoid authorized signatures on personal accounts
  • Avoid joint liability on loans when possible

    • Insure Against Losses When Practical

  • Self insurance (deductible & co-insurance)
  • Errors & omissions insurance
  • Product liability
  • Personal liability umbrella
  • Foreign captive insurance
  • Diversify coverage among insurance companies
  • Make sure companies are among highest rated
  • Use variable annuity/life insurance contracts when feasible

    • Avoid Unnecessary Exposure

  • Avoid serving as an inactive corporate officer
  • Avoid serving as director of a corporation
  • Avoid general partnership and proprietorship
  • Check environmental liability on land purchases
  • Don't rely entirely on one advisor
  • Don't ignore legal protocols of various entities.
  • Use multiple entities for maximum protection
  • Segregate safe assets from high risk assets
  • Provide mechanism to change trustees of trusts
  • Dispose of unneeded high risk assets
  • Avoid loaning property to others who might misuse the property
  • Don't agree to serve as an executor or trustee except for your closest family members

    • Avoid Fraudulent Transfers

    Measure solvency under state and federal law before making transfers
  • Exclude all protected assets
  • Base asset values on fair market value
  • Include contingent liabilities
  • Include future income that is available to pay creditors

    • Avoid gifts when insolvent under applicable law

    Avoid gifts after exposure to potential claims unless there are enough assets or future income to satisfy those claims

    Make Gifts to "Safe" Family Members

  • To spouse if not subject to litigation risk and if there is no concern over a divorce.
  • To parents in trust or via FLP
  • To Children in trust or via FLP
  • To an Irrevocable trust
  • To a Qualified Residential Retained Interest trust
  • Get qualified appraisals for assets not listed on an exchange

    • Transfer assets to protected entities

  • Limited partnership with transferor as L.P.
  • Closely held corporation (minority interest)
  • Irrevocable life insurance trust
  • Offshore asset protection trust
  • Charitable remainder trust
  • Family foundation

    • Checklist for Using Family Limited Partnerships

  • Don't use FLP to hold only idle or personal assets
  • Don't combine low risk and high risk assets in the same FLP
  • Maximum protection is obtained if highest risk family member is not the general partner
  • Greater protection is likely if the FLP has multiple partners
  • Consider having L.P. interest owned by a foreign trust
  • Avoid personal use of FLP assets without compensation to the FLP
  • Maintain separate bank accounts for the partnership

    • Checklist for Using A Controlled Corporation

  • Avoid more than 49% ownership by one family member
  • Controlling shareholders, officers & directors should be covered by adequate liability insurance
  • Use a FLP or LLC to lease critical assets to the corporation
  • Avoid personal use of corporate assets without compensation to the corporation
  • Maintain separate bank accounts for the corporation
  • Maintain corporate minute book, stock ledger and by-laws
  • Minimize the use of employees when possible or isolate employees from assets in separate legal entity
  • Segregate unpaid payroll taxes from all other bank accounts
  • Avoid personal loan guarantees whenever possible
  • Withdraw any idle (unneeded) cash or other assets if possible
  • Don't use the corporation to accumulate passive investments

    • Checklist for Offshore Asset Protection Trusts

  • Don't put all of your assets into an OAPT
  • Don't structure the trust to achieve tax benefits
  • Avoid putting appreciated assets or growth assets into the offshore trust
  • Greater protection will occur if the grantor/settlor is not a trustee or is one of three trustees
  • Make the OAPT irrevocable with the grantor as a discretionary beneficiary rather than a primary beneficiary
  • The OAPT can be structured as a temporary (reversionary) trust with a fixed term of years
  • The settlor/grantor should not be the primary or sole beneficiary
  • If the settlor/grantor is a trust protector, his or her powers should be suspended during periods of duress

    •  

     
     


    Further details about protecting your assets from future lawsuits  are available in our subscriber's web site. Changes in the tax laws and various federal and state laws affecting various asset protection devices are provided in our monthly newsletter on Asset Protection Strategies.

    NOTICE: This Information is intended only for educational purposes and may be regarded as controversial by some legal experts. Readers should consult with a qualified  professional who is familiar with their specific financial and tax circumstances before adopting any ideas that are discussed in this article.

    About the author:

    Vernon Jacobs is a CPA/CLU who works as a tax author and consultant.  He  sponsors and moderates a free discussion group on asset protection and offshore topics.  His email address is vkj@rpifs.com.  He can be reached by phone or fax at (913) 362-9667.


    || Top || Lawsuit Home || Lawsuit Index ||

    Your suggestions for improving this web site are most welcome. 

    Sponsored by Research Press, Inc., Copyright, 2001, all rights reserved. Offshore Press, Inc., Box 8194, Prairie Village, KS 66208. (913) 362-9667. Email to rpi@rpifs.com.