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Foreword
obligation or judgment, the less effective the power of the protection. To be successful, the asset protection must be "old and cold," predating the forseeability of the obligations, debts, judgments, and criminal acts of the defendant. The vehicles used by the plaintiffs and their attorneys to pursue their claims are made under the Fraudulent Conveyance Acts of many states and the U.S. Government and the Statute of Elizabeth in the British Commonwealth. Basically the creditor tries to take apart or unwind the asset protection strategies by convincing the judge that the plan was set up to defraud the creditor and create roadblocks from letting the creditors get to their due. The test used by the court and by the experts retained by the plaintiffs is the intent of the debtor, and his or her state of mind, at the time the trusts and plans were set up and the assets removed from their jurisdiction. If the creditor can convince the judge or jury that the asset protection was enacted specifically to defraud, then the best-laid plans go to hell. If, however, the defendant can persuade the court that there was a legitimate purpose for the creation and continued existence of the strategy, and that it pre-dated the financial problems that the plan just happened to protect, then you have a shot at saving your bacon! If you want to consider asset protection as a temporary measure or want to try to gut it out in the U.S.A., then you need a plan. First, lets make a review of your current financial statement (the real one that you gave the bank last year, when you had to borrow money). This document, and others like it, defines your assets, their value, and the sources of income, which become the target of your post judgment creditors and Uncle Sam. Once you lay out your full financial picture, you then need to maximize state and federal law exemptions in your favor. Some of the most important things you should consider are the following: Personal Residence Personal Property (like vehicles, boats, aircraft, artwork, etc.) Life Insurance and Annuities (with equity) Wages Spousal Separate Property Trust Assets and Property Partnership Property Business and Corporate Assets and Property Corporate Stock Inheritance
By putting all possible property in a category that is exempt, you thereby avoid the issues and claims of fraudulent conveyance and create a barrier between the asset and the creditor. Once you use up all of the possible exemptions, then it's time to begin the asset protection process by using a combination of domestic and offshore strategies to further protect yourself and your hard-earned wealth. At the top of the list of assets to be protected are the negotiable liquid assets such as cash, savings accounts, and brokerage accounts. If you have the guts, take it offshore, using one of the many methods we have discussed in this book. If moving your assets is not to your liking, then you can try the expensive process of purchasing a foreign annuity or life insurance contract in a friendly foreign country. If we can assume that you pick a favorable and stable country as the host for your policy and contract, then you will be exempt from attachment by U.S. judgment creditors. Next, you must legally make a one time filing of IRS form 720 and the payment of a 1% excise tax on the amount expatriated. The only additional cost is the cost of the annuity, which may vary from 1% to 5% as an upfront fee plus a small annual maintenance charge. In most cases, premiums paid to insurance companies are limited by U.S. tax law, where contributions to annuities are unlimited. Each of these products offers the inducement of tax-deferred growth and offers an additional benefit in life insurance and non-taxable policy loans to the owners of the policy. Combine these features with the benefit of self-direction of the investment portion of the product and you can see why this is the vehicle of choice for the well-heeled tax and debt avoider. (Note: The big difference between tax avoidance and tax evasion is that avoidance is legal. We all have a legal right, and I think a legal obligation, to minimize our taxes by taking advantage of every word of the tax code.) Once you have divested yourself of your liquid assets and cash, the next order of business is to shelter the more tangible assets, such as real estate, vehicles, boats, aircraft, and the like. The best way to protect assets of this type is to load them up with debt. Fred Bogart's pride and joy, the apple of his eye, was his 85 foot sailing yacht, anchored in St. Barts, in the Nedierland Antilles. This yacht, worth more that $2 million, was bought in trade for company stock that headed south in a heartbeat in the oil and gas stock market debacle of the 1980s. This devaluation of his paper millions raised