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PAUL C. WRIGHT, ESQ

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NEWSLETTER

Our Newsletter is sent out monthly and includes developments in immigration, business, and international law. To subscribe, send an email to: pcwlaw@pangeaspage.com

Newsletter for October 26, 2008

THE GROWING NEED FOR ASSET PROTECTION

Foreign Asset Protection Trusts by D.A. Bryan

As the global financial horizon darkens professionals and business people must face one fact; economic slowdowns usually mean more lawsuits. Think about it, the easiest way to make money in faltering economic environment is to take it from someone else’s pocket. And your soon-to-be plaintiff will have plenty of willing accomplices, at a 33 percent fee, in the nation’s army of contingent fee lawyers. So how does a hardworking professional or entrepreneur protect what he’s earned? Asset protection trusts

Of course there have been recent attacks on the concept of asset protection, mostly from the IRS and Bankruptcy but astute practitioners can learn how to avoid making the same mistakes. You’ll also have to learn to spot your share of shady characters who will take you for a ride, if you let them. But even in the worst cases one thing is clear, the courts have accepted that asset protection, or wealth preservation, is a legitimate business goal.

First we should be clear, offshore trusts do not result in tax savings. In fact, recent changes by the IRS require that assets in an offshore trust be declared annually. IRS rules also make it plain that an offshore asset protection trust is tax neutral; meaning that there is no tax advantage to forming an offshore asset protection trust. So why do it?

Asset protection trusts offer protection from illegitimate malpractice or negligence suits, which are particularly nettlesome for the modern earner. All too often a diligent businessman or professional faces extortion from greedy lawyers and their clients who often file unwarranted claims for staggering amounts of money. Often the business will settle just to avoid years of costly litigation and unnecessary disruption. An offshore trust, properly structured, can effectively remove assets from the settlor’s balance sheet and protect them from groundless lawsuits, without creating negative tax consequences. Even more, with your prior approval offshore trust assets can e invested in funds that are not available in the United States, doubling the financial impact of the protected funds.

Offshore Asset Protection Trusts work because no country in the world automatically recognizes U.S. judgments. The US tort lawyer realizes that he will be forced to bring his case in the jurisdiction where the assets are located, usually he will have to put up a bond for legal fees and contingency fee arrangements are not allowed. And that’s just the jurisdictional issue. Most jurisdictions have legislation preventing a claimant from accessing your assets unless very specific criteria are met. The best of these statutes not only require the claimant to bring the action in their jurisdiction, but also impose a time limit for a claimant to challenge any transfer of funds into the trust. For the greedy tort lawyer this is a double whammy.

Of course there are other considerations for the careful businessman. There are far too many con artists operating as “asset protections experts” hawking plans that are useless at best and at worst will land you in lockup for 3 to 5. But don’t allow the crooks to prevent you from taking action to protect your family. For a careful assessment of your risk of lawsuit and your financial and legal options contact the Offices of Paul C. Wright for more information.