Asset protection is neither an organized body of law nor an established specialized practice of law, but a strategy the weaves existing legal structures and products into a cohesive framework that is designed to protect selected assets of a person from certain identified types of claims. There is no one grand method or design. The asset protection plan for each client must be carefully crafted after identifying the assets sought to be protected, the claims sought to be protected against, the relative risk of each type of claim in terms of frequency, likelihood of occurrence, and the likely amount of loss.
What are the usual asset protection devices?
Most asset protection plans include one of more of the following devices:
a. Offshore trust g. Charitable trust
b. Self-settled trust h. Gifting plans
c. Liability insurance i. Life insurance policy
d. Limited liability company j. Joint ownership
e. Irrevocable life insurance trust K. Debt instrument
f. Irrevocable trust
What other issues are involved?
Very significant in the development of an asset protection plan is what is the cost to implement the plan and then what is the cost to maintain the plan. Such costs then need to be measured against the cost of the risk. Also to be factored in is (i) the likelihood that the plan will be effective; (ii) the ability to reverse or undo the plan should the client’s situation change; and (iii) any significant tax costs.
