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A Few More Asset Protection Rules.

By Rob Lambert - Email Editor

Date : 03-May-2007

Dear Subscriber:

The rules keep popping out! Here are a few more for this week.

DON’T LET THE TAIL WAG THE DOG

A lot of people investigating Asset Protection put tax savings at the top of the list. This is a mistake. Most solid Asset Protection does not save any taxes and often increases the compliance costs. If some Asset Protection “Plan” is being marketed to you for tax benefits, then take a step back. Have a real tax lawyer or tax accountant take a look at it. After all, they often have the best B.S. meters and should be involved with your planning anyway.

With this said, most Plans should permit almost any type of tax planning. Just remember: Tax planning should not be the focus of your Plan.

THE NAPKIN RULE

Asset Protection Planning really does seem like brain surgery in many cases. Just remember, the best planning is normally simple and elegant. There is rarely a need to engage in complex unintelligible structuring nightmares.

I often say that a person’s Plan should be able to be drawn on a normal cocktail napkin. If it is any more complex, then it probably is too complex. This goes for millionaires and billionaires.

Another good practice is to always prepare a road map. This road map is a simple one page diagram of the Asset Protection structure. Every entity and notation on that map should have a purpose or it shouldn’t be there…and even more important, if you as the client don’t know the purpose of each and every entity or notation, then you aren’t ready to do the Plan.

TRUST

Last night I was speaking with a very successful entrepreneur who wanted to protect himself. He is getting tired of watching his colleagues be torn up by senseless and seemingly never ending litigation. He said that he just couldn’t do Asset Protection. I asked him why. He replied something to the effect that he couldn’t trust anybody. I dug a little deeper and found that the Asset Protection experts he had spoken with all wanted to have him put his assets (which included stock in his businesses) into the hands of trustees. He just couldn’t do this as it put his assets and business at risk.

I took a step back and laughed. I explained to him that it is never necessary to expose yourself to theft or dishonesty. In fact, I explained further that it is my RULE to assume that each and every trust company is a crook and to structure all Plans so that the client is never vulnerable to be harmed by some rotten apple trustee.

Remember, trust nobody. No solid Plan should ever put you into this bind.

Have a healthy and protected week.

Rob Lambert

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