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Rob's Rules: Know Thy Opponent, And Stealth Matters.

By Rob Lambert - Email Editor

Date : 05-April-2007

Dear Subscriber:

My clients often tease me because I am always referencing my Rules of Asset Protection. Today I thought I would briefly touch on two rules I seem to have been talking about a lot lately. Please let me know if you would like to see my complete list in an e-book.

RULE: KNOW THY OPPONENT

Why does this matter? Who cares who the opponent is. Either Asset Protection works or it doesn’t. Right? NOT TRUE. Plans are tailored depending on who the perceived future opponent might be.

Remember, there are different rules for the government than for normal humans or businesses having a fight (aka lawsuit). Governments have all the cards stacked in their favor. The Federal government has tools which are not available to civilians. In particular, the Feds now have access to all international banking information. The Patriot Act and its later progeny have changed the rules. The price for a bank in any place of the world to have a relationship with a U.S. correspondent bank (necessary for access to the Fed Funds system) is that the bank gives the U.S. authorities access to account information. Under the guise of national security, the U.S. has also engaged in exhaustive legal and probably illegal monitoring of communication (phone, email and other) into and out of the USA.

In short, you should assume that the government knows all, and that what they do not know they can find out easily if they want to. In short, in this post 9/11 environment, financial privacy is all but dead when it comes to the government.

Since Asset Protection should never ever be used to avoid a legitimate tax obligation, this isn’t all bad especially if the information is really being used to stop the guys who want to blow us all up.

Some people look at the ever increasing capacity of the U.S. government to access international financial records as sounding the death knell for financial privacy. Yes, this is true when it comes to the government; however, there is an important exception. The government is not supposed to share the sensitive international financial information with any person or entity except for legitimate law enforcement purposes. It is illegal for agents of the USA to disclose this information to anybody (including spouses).

Yes, every year, several hundred governmental employees are fired for leaking private financial matters; however, in the vast majority of cases, your private financial information will not be available to any civil opponent.

This is an important point. Even though the government does have information on your offshore accounts, your opponent will not. There is still a strong tradition of financial privacy at many offshore financial institutions. They simply will not tell your opponent anything about your accounts without a court order from a judge in their country. In most countries, such an order is next to impossible to get.

So, the bottom line is that financial privacy is alive and well when it concerns normal litigation, which does not involve tax fraud or other criminal matters. Knowing your opponent is important. Asset Protection will work all day long in the normal civil context; however, don’t expect even the best Plans to protect your assets from a Department of Justice tax fraud prosecution. Know your opponent and design your Plan with the capacities of your opponent in mind.

RULE: STEALTH MATTERS BUT DON’T DEPEND ON IT AS THE BASIS FOR A PLAN

In all cases stealth is good. Remember, Asset Protection Planning is basic game theory. We aim to make the bad guys spend a dollar to collect a dime. Under the assumption that most potential creditors are litigating for money and not on principal, if you destroy the financial incentive to litigate, you have a pretty good Plan.

Even so, all Plans should work even if the opponent has full knowledge of all the facts. Plans should be based on international legal technology and not stealth. Always ask will the protected assets continue to be protected even if my opponent knows all the details of the Plan? If the answer isn’t “yes,” then you need a different sort of Plan.

Well, that’s it for now.

Have a healthy and protected week.

Rob Lambert

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