Assets Protection is something that everyone should consider due to an increase in litigation against individuals. An unjust or unfair court action can have these assets seized if you aren't careful. Here you will learn the nature of these actions, how a court enforces them and how you can protect yourself. Don't think this will protect you from actions that are just and fair. Contracts must be enforced if they are legal. Litigation has taken this too far though and if someone believes you are wealthy, they may choose to file a fraudulent suit to obtain some of what you have. Unfair litigation and the results of these suits can destroy your life and legacy, taking you from wealth to poverty although you have done nothing wrong.
You should have two goals when it comes to Assets Protection:
- To give the appearance that you have no assets so others aren't tempted to file a gratuitous lawsuit
- To inhibit the ability of a plaintiff to seize your assets as a result of an unfair court order
Judgments are enforced where you live so only the United States can enforce a judgment issued in this country. In order to obtain your assets, the judgment must be re-filed in the country where the assets are and they determine if they want to uphold this judgment.
A court must find that you can pay a judgment and then enforce it by seizing your assets. Anything owned or controlled by you for your own benefit is classified as an asset. If the court believes assets are being hidden, you can be seized under a contempt judgment for not delivering them.
The United States distinguishes between creditors. Bankruptcy creditors are limited in what they can claim such as 401(k)s and IRAs. Those who are seeking to recover alimony or child support have access to everything though. A court cannot forgive these.
Protection Strategies
Legal entities such as corporations and family partnerships can be used to shield your assets from being seized. You won't have ownership or control of them when this is the case. There are two categories of Assets Protection and they depend on where the asses are located.
- Domestic strategies involve you forming an entity within a state which offers favorable protection laws.
- Off-shore strategies involve the formation of a foreign legal entity. Your assets are placed in this country so they cannot be reached by the United States court system and your creditors.
Fraudulent Entity
When a court finds that you have created a fraudulent entity and have the right to control these assets, the assets may then be seized legally and delivered to the plaintiff. The court also has the option of requiring you to deliver the assets.
Fraudulent Transfer
The court may also determine that you have created a valid entity, but that you transferred assets to the entity fraudulently. This occurs when you transfer assets with a two to four year period of the time the assets claim was filed. This time period differs from state to state. If the court determines this is the case, your Assets Protection strategy fails and the assets are seized. In order to transfer assets so they may not be seized, you must do so before any claim is even contemplated, much less started. This will prevent the plaintiff from arguing this is a fraudulent transfer.
Judgment Enforcement
Here is where the strategies differ. Domestic assets may easily be seized as they fall under the jurisdiction of the United States. Those outside of the country can't be taken as easily. Only if you are ordered to produce off-shore assets and refuse to do so can you be jailed for contempt of court. This will require that you be in the jurisdiction of the United States. The sooner you put these Assets Protections into place, the more protected you will be. Of course, it is better if no one knows you even have them.