Top Ten Asset

Protection Mistakes
By: Jacob Stein, Esq.

Having completed hundreds of asset protection transactions over nearly 20 years, here is our list of
Top Ten Asset Protection Mistakes we see with our clients.

1. Believe that “bad” things happen only to others and there is no need to plan today.
This is the most common planning obstacle for our clients. Their life experience tells them that “bad” things
happen to others and never to them. This usually means that they wait until something happens to them (a
business decline, a loan default, a car accident, a lawsuit, etc.) and then rush to plan. Planning after the fact is
much more difficult and more expensive.

2. Not realistic what will happen once a judgment is entered.

Because most people do not have the experience of being sued, there are often unrealistic expectations as
to what will happen. Holding on to the belief that bad things happen to others, a great many defendants
and debtors hold on to their hope that somehow the bad thing will go away. The lawsuit will be dismissed,
they will prevail, the plaintiff will obtain a judgment and not pursue, they will pursue a judgment but not be
able to collect.

3. Think that they cannot lose their home no matter what happens.
This is likely the most common blind spot for our clients. For various reasons, when we speak to a new client,
they believe that no matter what happens they will get to keep their home. That may be true in some states,
like Florida and Texas, but is not true in most states. A judgment creditor can place a lien on the debtor’s
residence, and once the lien is in place they can move forward with a judicial foreclosure. Which means that
their house will be sold, income taxes must be paid, belongings must be packed, etc.

4. Would like to gift all their assets to their children and think it’s a full-proof method of protection.
It is natural to gift assets to children – they are the obvious objects of our bounty, it is easy to do, and there
is a perceived retention of control. A creditor will have an easy time challenging a last minute, gratuitous
transfer to any person, including children. They will do so by filing a voidable transfer lawsuit against the
transferee – the child. Children may also be subject to their own lawsuits and claims. We strongly advise
clients to avoiding gifting assets to children. It is much better to transfer assets into a trust for the benefit of
the children.
5. Are paralyzed with fear and think that it is too late to plan once a lawsuit has been filed.
Everyone has heard the rumors that once a lawsuit has been filed it is too late to plan. That is simply not true.
While the planning may be less effective and some options will no longer be available, a lot can be done to
improve your negotiating position.

6. Not having enough insurance, including umbrella insurance.

Most claims and lawsuits can be covered by insurance, if there is a policy in place at the time of claim or
lawsuit. We strongly urge all of our clients to carry significant insurance coverage, especially umbrella.
Umbrella insurance is inexpensive and covers a broad variety of claims.

7. Consider living trusts to be effective creditor shields.

The purpose of a living trust is to avoid probate and help deal with incapacity. Because a living trust is
revocable, there is no creditor protection. As a matter of fact, state law specifically provides that creditors can
pursue assets titled in a revocable trust. All asset protection trusts are irrevocable.

8. Concerns about the inflexible nature of irrevocable trusts prevent planning.

Historically, irrevocable trusts have been “cast in stone.” We could not change them or retrieve our assets. That
is no longer true. We are now capable of drafting irrevocable trusts that allow our clients to retain control,
retrieve their assets and make changes to the trust agreement.

9. Worried about offshore service providers and keep assets onshore.

For many Americans, “offshore” is a dark and mysterious world that belongs in a Grisham novel. While there
may be offshore jurisdictions that are like that, many are well-developed countries, with transparent and
accountable trust and financial institutions and government oversight. We are mindful of working with long-
established and reputable service providers that will not only look after our clients’ best interests but will also
preserve our clients’ funds.

10. Believe that they don’t have enough assets to protect.

Whatever you have is, by definition, everything that you have. You should fight to keep and preserve your
assets. Claims and lawsuits are not limited to the very wealthy. We have represented many clients with
modest estates who found it of paramount importance to keep their homes and life savings.

Jacob Stein, Esq. is the managing partner of Aliant,

LLP. He specializes in asset protection planning,
complex U.S. and international tax planning, and
structuring international business transactions. To
learn more, visit www.aliantlaw.com

Contact Jacob:
jstein@aliantlaw.com
818.933.3838