08 Jun First Rule of Asset Protection
If they can’t see you, they can’t sue you
It is absolutely critical to understand this rule of Asset Protection. Privacy is the cornerstone of lawsuit prevention…and lawsuit prevention is the nucleus of Asset Protection. You can stop legal actions before they ever begin by becoming financially invisible.
Financial Privacy: The 3rd Pillar of Private Banking Strategies®
A critical step in avoiding personal liability and protecting your hard-earned assets is to reduce and ultimately eliminate your personal financial footprint. You’ll want to accomplish this in your business transactions, your real estate investments, and in all of your financial dealings whenever possible.
Protect your non-cash assets
Non-cash assets must be protected in your private fortress – just like your cash.
How is that possible? By becoming as small as possible in the public domain when it comes to how successful you appear to others. Especially to those who may be looking for indicators of your wealth.
As a plaintiff’s attorney analyzes whether a defendant is a worthy target (victim) or not, they will certainly perform an “asset investigation.” That asset investigation will include a review of the public records, including real estate chain of title records, company filings with government entities and many more things which would give the plaintiff’s attorney critical information that has been volunteered by the victim unknowingly.
The plaintiff’s attorney can “connect the dots” and determine what an individual owns or has an interest in, which in turn, motivates the plaintiff’s attorney to pursue them as their next victim.
But when that same plaintiff’s attorney sees their prospective victim has assets that have been stripped of all equity, assets that are over-leveraged, and assets encumbered beyond fair market value…then there is nothing to go after…poof! they will go away.
Why would a plaintiff file and pursue an expensive lawsuit to wind up with an uncollectable judgment? They wouldn’t.
And a contingency fee lawyer will not invest his time, energy, and money into a case that he can’t collect on. A lawsuit is a financial investment for which an ROI is expected. No ROI, no lawsuit. A target individual or company that is apparently judgment-proof will make it look dead and worthless to a plaintiff’s attorney.
This technique is called “equity stripping” – the art and science of making a business or individual appear to be worth much less than they are. That perception will protect you from lawsuits. And perception is everything when it comes to Asset Protection.
This structure absolutely minimizes liability, maximizes anonymity, and makes lawsuits difficult if not impossible for contingency attorneys to initiate. Equity stripping also insulates assets from judgment and attachment.
Our approach to Asset Protection planning has protected our clients from tens of millions of dollars in claims and has never been pierced. And even for those who have never had it tested in litigation, they have saved hundreds of thousands of dollars in lawsuits that never happen, and attorney’s fees that they never incur…
This strategy is worth its weight in gold
Take Dr. Hope for the Best (obviously he came to us for Asset Protection and financial anonymity, so we respect his privacy).
He was a successful surgeon in his early 60’s who had amassed a small fortune. Ever heard it said, “hope for the best, plan for the worst?” Sadly, before he came to us, Dr. Hope for the Best had failed to plan for the worst when it came to keeping what he had already made and structuring his family assets with financial privacy in mind.
When he was unexpectedly sued and found liable for negligently performing a surgery, he thought he would be “ok” with 10 million dollars in professional liability coverage.
Unfortunately, the jury awarded more than his insurance policy limits – an “excess verdict” – meaning that his insurance company would pony up $10 million dollars to the plaintiff but everything over $10M was enforceable against his cash, investments and personal family assets.
This type of situation is a plaintiff’s attorney’s dream and Dr. Hope for the Best’s worst nightmare – and it was devastating to him, his wife, and his family.
Plaintiff Attorney’s Nightmare
You may be letting out a sigh of relief that you didn’t choose that career path, but you don’t have to be a surgeon to need Asset Protection and Financial Privacy.
Most people fail to realize that seemingly innocuous aspects of their lifestyle can lead to a costly liability putting their wealth and family at risk. Simple things we all do, like:
- Employing household staff or maid who is exposed to harmful chemicals that are under your sink and claims her lungs are damaged
- Your landscaper cuts off his fingers in his lawn mower cutting your grass and sues you for lost earnings for the rest of his life
- You are a volunteer board member of a charitable organization who is accused of poor decision-making costing the charity millions
- Your licensed son or daughter (or employee) injures someone else while driving your car that you gave them to run an errand (parental liability and employee liability)
- Your dog bites someone
- Countless other permutations of remotely, statistically improbable things happening to ordinary, everyday people that financially ruin them because they weren’t prepared.
I can’t tell you the number of people who have suffered through financially devastating lawsuits and lost personal assets who have said, “I wish someone had talked to me beforehand about the risks I was facing and what an ounce of prevention could have saved me.”
Would you rather create this protection now…?
Or after something unexpected happens and you’re forced to start over?
Many folks misunderstand how easy and affordable it is to set up an Asset Protection structure. You don’t need expensive (and risky) offshore bank accounts or complicated multi-layered legal schemes. You just need to move your assets out of harm’s way.
In Episode 15 we discuss the importance of a robust Asset Protection plan. Listen to our other Podcast episodes to learn more.