Asset Protection - New York & New Jersey
Rising threats of litigation and an ever expanding series of liability threats make asset protection more important than ever. In United States we are in a victim-oriented claim society. Financial threats come from everywhere. Whether you want to try to avoid identity theft, or stave off a potential future liability, at Sampson Law Group we have powerful asset protection tools that can provide just the right layer of asset protection and to help safeguard your privacy.
Some of our asset protection plans can be more costly than others. These plans are more suitable for clients who are involved in highly litigious careers (architects, doctors, and lawyers) and certain business owners who are exposed to certain risks and threats of malpractice. High levels of asset protection may also be needed where there are potential receipts of substantial inheritance, people who deal with investors, and owners of airplanes, boats, and heavy equipment operators, celebrities, high net worth and high visibility persons, certain real estate owners, and wealthy spouses of successive marriages, and parents of teen aged drivers.
We offer a variety of asset protection planning measures to suit a wide range of clientele. Estate planning can provide asset protection through gifting, charitable trusts, irrevocable spendthrift trusts, and marital trusts.
However, asset protection is more than just trusts so we advocate layers of protection carefully crafted into a shield tailored to your perceived potential threats.
We believe that adequate personal and business insurance should be in place at all times. Personal insurances like auto coverage and homeowner's insurance with an umbrella policy are important. For business owners, hey commercial General liability insurance policy with an umbrella policy should be sufficient. Depending upon the type of business you're involved in, you may want to consider a policy that covers employment practices. For professionals, malpractice liability insurance is important. In every case, our clients must be careful to read the fine print of all of their policies, and ask questions in order to determine the adequacy and sufficiency of their insurance coverage.
The transfer of jointly held property like that that is held as tenants by the entirety into separate individual interests may offer a level of protection for some married couples. As long as the transfer is not considered a fraudulent conveyance deed transfer of separate property or jointly held interests of a professional spouse into the name of the nonworking spouse maybe a good idea in some instances. Marital planning does offer good asset protection however; it may be detrimental in the event of a divorce.
Business Entity - The Selection
Depending on the entity chosen, creating a business entity can lend asset protection against debts and future claims. However, if a client owns everything in a single entity there is the potential that a single lawsuit can result in a devastating loss to the owner(s) of that business. It is important to segregate A clients most risky and valuable assets into separate entity structures. This will keep potential creditors at bay because only the entity involved in the lawsuit will be at risk.
There can be a lot of exposure if real estate is held as a jointly owned property. Placing real estate into an LLC or Family limited partnership is more advantageous with regard to asset protection. When looking at the entire picture, clients need to carefully weigh and balance asset protection with tax planning when placing their real estate into an LLC.
When people are considering utilizing an LLC to protect their assets they need to consider the following: the expense of setting up an LLC, the jurisdictional protections of forum shopping for LLCs, the proper corporate governance practices and maintenance of the LLC together with certain income tax elections that affect these elections. A variety of favorable LLC jurisdictions exist including: DE, AK, SD, AZ, NV and WY. Florida is particularly favorable to multi-member LLCs.
Family Limited Partnerships (FLP's)
Family Limited Partnerships (FLP's) can be used as asset management protection tools and are an integral part of any solid asset protection plan. A FLP can act as your own 'family holding company.' It can hold your interest in various LLC's or other company holdings. Depending on the jurisdiction you choose, it can have an extremely high charging order protection for the partnership. This entity can easily work in tandem with your trust protections, and adds another level of privacy to your life and assets. It is also an excellent vehicle for Estate Planning!
A charging order is in order by a court, in favor of a judgment creditor, that requires distributions from an LLC to be made in favor of a judgment creditor. However, if there are no distributions from the LLC, and the charging order is the exclusive remedy for the creditor, the creditor will not receive anything. This is advantageous for clients seeking asset protection.
Domestic Asset Protection Trusts (DAPT's)
Domestic Asset Protection Trusts (DAPT's) are utilized in asset protection because probate can be avoided, privacy can be maintained, and the transfer of assets can be more efficient. In the United States however, a Settlor's creditors can reach trust assets while the Settlor is living. DAPT's can afford a barrier against creditors because you can use deterrence as leverage with respect to creditor negotiations.
Spendthrift clauses in a trust add a layer of protection against creditor's claims, except where the Settlor is the beneficiary. As of this date, 14 states have legislation in place that provisions spendthrift protection to a Settlor-beneficiary. Any DAPT should be established in one of those jurisdictions.
Foreign Asset Protection Trusts (FAPT's)
Foreign Asset Protection Trusts (FAPT's) are trusts that are formed in an offshore jurisdiction. An offshore jurisdiction trust places assets effectively out of the reach of US courts. Offshore trusts can provide the maximum layer of protection for clients seeking to protect their assets from creditors because those creditors would be required to litigate in a foreign jurisdiction, and be subject to foreign laws and judicial systems. The main reason offshore jurist diction trust work is because of the deterrence factor and tremendous costs involved in prosecuting those actions. Many foreign jurisdictions do not recognize US judgments so a new trial in a foreign jurisdiction where the burden of proof is higher than in the US judicial system would be a major deterrence for the creditor. Also, the creditor would face problems with the statute of limitations in commencing their action in the foreign jurisdiction, and would likely not succeed for that reason alone.
The most important strategy in asset protection is working with layers and to design a comprehensive asset protection plan. While no strategy can prevent a law suit, carefully designed protection layers will certainly help with the settlement or potential dismissal of a lawsuit.
At Sampson Law Group we take asset protection very seriously. We have the knowledge and the skill to help guide you through the process of crafting just the right protection for you and your loved ones.