Asset Protection: Is it ethical and moral?

Without going into a philosophical discussion about morality, it should be said that, in today’s society, morality is something deeply personal. Exceptions would be in cases where others might be harmed.

One example is alcohol. Every state has a legal drinking age. However, since drinking and driving is harmful to others, you are not allowed to drink and drive.

The hardest questions regarding morality seem to be in separating cases where asset protection is appropriate from those where it is not. Moral implications of creating a particular asset protection plan for a particular circumstance may determine whether or not the plan ultimately works

The following scenarios may help demonstrate the moral issues involved in asset protection planning. Reading through these scenarios may bring forth reaction of either compassion or aversion, similar what a judge or jury may feel toward the debtor and, by association, the debtor’s planner.

A businessman takes a loan from a bank for the express purpose of making vases. The bank makes the Businessman guarantee the loan. In which cases below (if any) should the Businessman be able to protect his assets from the Bank, and to what extent?

A. Businessman doesn't use the money to make vases. Rather,; he purchases an Italian Sports car.

B. Businessman intends to pay the bank back but, instead of investing in manufacturing equipment, he uses the money to buy stock on margin. His stocks all tank and he cannot repay the loan.

C. Businessman makes vases as planned, but there is an unexpected decline in the demand for the product, causing the business to fail. Before granting him the loan, the bank assured the Businessman that, should he needs more money to achieve something, the bank will make additional, larger loans to him. Relying on this, the Businessman applies for the loans. Later, at a critical point for the new business, the Businessman desires that the bank make the additional loans as. The Bank fails to provide the loans, and the business fails.

The fact is, in all the above cases, the businessman can protect his assets if he has put protection into place in a timely fashion. Meaning he had established it long before he was given the loan.

It may be felt this is unfair and that he should be made to pay up! Indeed, this is how a judge might see it, and award a judgment to the bank. However, then the bank has to collect on it.

This is where proper asset protection works like a charm. If an individual controls his assets, but doesn’t REALLY own them, than they can’t be taken from him. The key for the businessman in our example is this: Any domestic asset protection alone will not keep his assets out of reach. He must have a plan that gives him the option to use a foreign trustee.

Remember, one of the two fundamentals of asset protection is that "no foreign country automatically honors United States judgments." A plan availing him the option of choosing a foreign trustee means the bank will have to pursue his assets on foreign soil. This is a costly and hard to win fight.

The moral of the story: Good asset protection will protect your assets, absolutely.