A Few Simple Asset Protection Rules

Date : 19-April-2007

Dear Subscriber:

I appreciate your loyalty. Many of you have been with me for more than 13 years. Thank you.

I have received a lot of positive feedback to my simple rules, so I am going to keep throwing them at you for a while. We also have had over 2,000 new subscribers in the last several months, so there will be many of you who have never heard of them before. To my loyal readers who have heard this before, forgive the repetition. Here are two more rules.

DIVIDE AND CONQUER

Never ever put two things which are important to you and worth protecting into the same “bucket.” When I say bucket, I mean entity. If you own a donut shop, two apartment houses, and a car wash, they each should be in different entities. Why? Simple. If all of these entities are owned by a single entity, say a corporation, LLC or Limited Partnership, a simple slip and fall with an uninsured loss at the car wash exposes all assets to the judgment creditor. Instead, if the car wash is isolated in its own little bucket, then it is much harder to get to the other assets. This is particularly true if the other assets are each in their own bucket.

A judgment creditor has little trouble taking the assets of the entity owning the car wash. The creditor will probably also get to the control persons (officers and directors) of the entity which owns the car wash. It is much harder to get to the other investment properties particularly IF they are owned in a solid Asset Protection Plan.

Always Divide and Conquer. If a new investment isn’t important enough to spend the money to put it into its own bucket (and great care is necessary to get just the right type of bucket) then I tell my clients to not make the investment at all. PERIOD.

AVOID HANDSHAKES

Handshake agreements stink. Always avoid them. A handshake deal is normally considered a simple general partnership (almost always a terrible type of bucket to hold an asset). Why? Again, the answer is simple. Each partner has the complete power to bind the entity. One partner can make commitments which can financially ruin the other partner. It also can get worse sometimes because normally each partner has an unfettered right to possess and enjoy all partnership assets. General partnerships are magnets for litigation. They should always be avoided unless there is a very solid reason to utilize this type of entity.

A SHORT THOUGHT FROM THE WEIGHT ROOM

Three days ago I was sitting in a weight room churning up a sweat. The airwaves were clogged with talk of some aging white guy’s comments about nappy headed ho’s. The press was tearing this aging bigot apart and would probably still be except for the terrible news from Virginia Tech. In the room I was being bombarded by popular rap music. Black singers were talking about killing white police, ho’s, drugs and, yes, even the N word was featured in some songs. I have a simple question. How come Interscope (or whoever is pushing this garbage) gets away and actually makes fortunes off of black guys peddling hate? It seems to me that what is good for the goose is good for the gander. I think we have a real double standard in the Good Old USA. If you have this figured out, please let me know. Hate is still hate whether it comes from the mouth of a white or black man.

Have a healthy and protected week.

Rob Lambert

ABOUT THIS EDITOR:

Rob Lambert, Founder and former law professor is considered to be foremost expert on tax compliant asset protection structures. A contributing editor to Lexus Nexus debtor creditors series of law books Rob's passion is implement client wealth plans that stand the test of time and hold up under duress.

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