Whether it is in combination with an estate plan or merely a standalone endeavor, protecting your assets in today’s litigious society has never been more important. Asset protection is not question of having it or not having it – just like protecting your health, asset protection is a question of degree – and it all depends on your needs and concerns. At Dorot & Bensimon PL, we have broken down the asset protection process to three categories: (1) Organic; (2) Semi-Organic; and (3) Artificial.
Not all asset protection requires an affirmative action. In many cases, asset protection is “organic” in the sense that it is available by the mere characteristic of the asset held and the manner by which it is held. For example, in Florida, we have Homestead protection for our primary residence. Under this law, the mere fact that you are a homeowner provides you a high degree of asset protection over your home if you elect for it to be your Homestead. This does not cost extra and you don’t need an attorney to do it for you, its just there. Also, in Florida, we have a form of ownership called “tenancy by the entireties.” This is available to married couples, so long as the asset is titled as such. This, too, does not cost extra and you don’t need an attorney for it.
This form of asset protection is one that may cost you money, but the cost is relatively small in comparison to the protection it provides. This category includes things like life insurance, annuities, car insurance, umbrella insurance and retirement accounts. While these are not “free,” they do not require a sophisticated plan or the involvement of an attorney to implement.
This form of asset protection is meant for those who have higher exposure due to the nature of their business, lifestyle or high-risk potential. This category would, in fact, require a qualified attorney to advise you on and help you implement the appropriate strategy. This category includes the use of business entities, irrevocable trusts, asset leveraging and more advanced strategies. At Dorot & Bensimon PL, we represent doctors, lawyers, real estate developers and many other individuals that may be in a highly-litigious field.
- Business Entities. Corporations, partnerships and limited liability companies (LLCs), aside from providing business structure and taxation efficiencies, all provide unique opportunities for limitation of liability – i.e., asset protection. Although today, with the advent of technology, anyone can go online and form a company, the ease with which it is done may be quite misleading. In reality, in order to overcome a claim by a creditor, each entity has its unique set of formalities that must be met, such as a proper governing agreement, proper resolutions, asset segregation, independent accounting and so forth. Furthermore, choosing the proper entity for the proper goal is not as straightforward as it seems. Selecting and implementing the correct entity in the correct manner will be the line of defense between you and your creditors. Having a lawyer consult you on the proper entity and implement the proper formalities is crucial – and without such guidance, you will only learn of its deficiencies when it is too late.
- Irrevocable Trusts. While revocable trusts provide no liability protection for the creator during his or her lifetime, properly establishing an Irrevocable Trust will protect you and your beneficiaries from creditors. Trusts are nothing more than a contract between two parties for the benefit of a third, and, therefore, each trust serves a different purpose to meet different goals. Determining the appropriate form of trust requires a high degree of proficiency and knowledge that can only be acquired through years of experience. Furthermore, different jurisdictions (i.e., different states) present different opportunities and different pitfalls, so consulting a qualified attorney is crucial.
- Discretionary Irrevocable Trusts. One of the most desirable trusts in the asset protection world is the “Discretionary Irrevocable Trust.” This form of trust, in a sense, lets you eat your cake and keep it whole. That is, as a settlor, you may be a beneficiary of the trust and receive benefits from it, despite being irrevocable and out of reach of your creditors. Of course, there are many nuances and parameters that allow this anomaly to exist and, therefore, must be entered into cautiously and with the appropriate advisors. These types of trusts are not available in Florida, but certain U.S. jurisdictions and foreign ones allow and respect this form of trust agreement. At Dorot & Bensimon PL, we counsel our clients as to the appropriate type, jurisdiction and form of Discretionary Irrevocable Trust so that you are protected from future creditors.
While all of the above-described and variations thereof are available before you know or reasonably should know about a creditor, once you know of a creditor or potential creditor, your options are significantly limited. As such, it is important to recognize one’s potential unknown creditors and put a plan in place before anything happens. Any form of asset shifting after a creditor is known can be deemed a fraudulent conveyance, which carries with it not only the loss of the protection, but additional civil and criminal exposure.
At Dorot & Bensimon PL we focus on tailoring our clients’ asset protection strategies based on their needs and goals. We have attorneys licensed in Nevada, one of the most protective domestic jurisdictions and can guide you through the process to protect your and your family’s assets.