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The Four Basic Rules

By Rob Lambert - Email Editor

Date : May 15, 2008

Print this out and put it in your desk drawer. It will help you in the future.

All Asset Protection—domestic or foreign—is designed to make it difficult or impossible for any creditor to take your assets away from you. When you start dealing with trusts, particularly offshore Asset Protection Trusts, the techniques can become complex, but the rules are simple. Here are the FOUR basic rules:

1. WHAT YOU DON'T OWN CAN'T BE TAKEN FROM YOU: Seems simplistic and almost moronic…but think about it. The act of funding a trust is basically the act of transferring your assets to a different (albeit artificial) person. If you give your “stuff” to someone, say the Red Cross, and years later a creditor of yours tries to take those donated assets from the Red Cross, the Red Cross is going to defend this by saying that they are not responsible for your debts. They can say this because the Red Cross is not you. It did not do the act that generated the “debt.” The moment you made the transfer, the assets do not belong to you. The Red Cross will prevail as long as the transfer to it was not a fraudulent conveyance. It’s the same process if you would transfer the money to your Asset Protection Trust. The assets held by this trust should not be reflected on your balance sheet as owned by you.

2. OLD AND COLD MATTERS: Remember, I said that the Red Cross will prevail as long as the transfer was not a fraudulent conveyance. One of the best ways to survive a fraudulent conveyance attack is to have what we call an “old and cold Plan.” If the Plan was funded a long time ago when the financial seas were calm, it is very difficult for some newly appearing creditor to get any judge or jury to believe that you funded your Plan knowing that you would be disenfranchising some future unanticipated creditor. I often tell my clients that implementing and funding a Plan is just the first step in the Asset Protection process for this reason: It starts the statute of limitations running on any fraudulent conveyance claim.

3. FOREIGN IS NOT “FOREIGN” IN ALL CASES: A properly structured Plan implemented when the financial seas are calm does not require that protected assets be moved abroad or even put into the domination and control of a foreign trustee. If the money is currently with the Bank of America, it can stay with the Bank of America, as long as the financial seas are calm.

4. NO COUNTRY IN THE WORLD AUTOMATICALLY ENFORCES U.S. JUDGMENTS: I have discussed this issue a lot. It is enough to say that this is a key rule. Remember: NO country in the world cares about our laws, our juries and judges determined to redistribute your wealth into somebody else's pocket! We have 7 percent of the world's population, and 94 percent of the lawyers. We live with a judicial system that is considered laughable in most of the rest of the world. In short, other countries know that our courts do not dish out justice in many—sometimes most—cases, and they do not trust our verdicts. Every country will force a retrial of the issues before enforcing a U.S. judgment. One of the nice things is that most of these countries don't permit contingent fee litigation, and they often force the person attacking you to post a bond to cover your legal fees if they lose.

Have a healthy and protected week.

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