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Back To The Basics

By Rob Lambert - Email Editor

Date: May 25, 2006

Sometimes it is good to go back to the basics.

All Asset Protection Plans, from the simple to the most complex, are designed to keep your assets safe from creditors. Plans typically break down into two general categories:
1. Those that are geographically specific.
2. And those that are geographically unlimited.

GEOGRAPHICALLY SPECIFIC
Some Asset Protection Plans involve laws effective in a specific location of the world. Examples of this type of protection are typical ERISA Plans (great protection in the USA from all creditors except a soon to be ex-spouse), state specific homestead laws, bankruptcy exemptions and state specific laws protecting assets held in certain types of insurance products. These geographically specific and limited types of protection should be part of all Plans. They are usually simple, reliable, inexpensive and effective (to a predictable degree).

GEOGRAPHICALLY UNLIMITED
This type of planning is usually more expensive, more complex, and in many cases, more effective and comprehensive than the Geographically Specific Planning. These plans normally have an international element.

Plans in this Geographically Unlimited category often involve Kinetic Asset Protection Trusts, offshore banking arrangements, and various offshore professionals including trustees, protectors, bankers, and others. Sometimes this planning also involves offshore insurance companies and insurance products. This type of protection is usually very effective when done correctly and should be combined with Geographically Specific Planning.

BASIC RULES FOR GEOGRAPHICALLY UNLIMITED PLANNING
All hard core offshore planning takes advantage of what I call “the second rule of Asset Protection,” which is: NO COUNTRY IN THE WORLD AUTOMATICALLY ENFORCES U.S. JUDGMENTS. We really should say that no country in the world automatically enforces judgments from ANY other country! This is a powerful tool, particularly when you realize that most creditors (and their lawyers) cannot see past the boundary of their specific state, much less into another state, and then into a totally different country.

It is a profoundly effective tool to force a creditor to litigate in some country with completely different customs, laws and procedures in order to pursue funds that they thought were located in the local savings and loan association. Remember another basic rule: Litigators sue for money, not principal. Most potential creditors are not willing to spend ONE DOLLAR to maybe collect a dime. That is what it all comes down to: basic personal greed.

All good planning makes it horrifically expensive to attack you. Now, this doesn’t seem to work with the aggrieved ex-spouse (particularly if he or she is litigating with your money!); however, it works with most people (and even tort lawyers!).

Another key rule, which I call the “first rule of Asset Protection” is: WHAT YOU DON’T OWN CAN’T BE TAKEN FROM YOU. All planning involving Asset Protection Trusts, and indeed most offshore planning, has an element of this. I have beaten this to death in many past newsletters and won’t do so again here. Just remember this rule, and the next time you think about taking title to something in your own name (or in a holding company with other important assets) think again because you are normally making a mistake.

Geographically Unlimited Planning (aka International Asset Protection Planning) allows you to choose the battleground. Normally, you can change the battleground with the stroke of a pen. This is another technique to make it cost dollars to collect pennies.

It’s a shame that it all comes down to personal greed; but at least that is predictable.

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