This is our methodology in developing the most effective asset protection strategy:
1. No Personal Ownership. The best asset protection strategies eliminate personal ownership by placing valuable assets in an irrevocable trust. If you get sued or go bankrupt, you will be asked to disclose everything you own. If your assets are in a 541 Trust™, they don’t need to be disclosed because you don’t own them. (“By establishing an irrevocable trust in favor of another, a settlor, in effect, gives her assets to the third party as a gift. Once conveyed, the assets no longer belong to the settlor and are no more subject to the claims of her creditors than if the settlor had directly transferred title to the third party.” In re Jane McLean Brown, D. C. Docket No. 01-14026-CV-DLG (11th Cir. 2002)).
Example A. Mr. Anderson was advised to put most of his valuable assets in a family limited partnership in order to protect them from future creditors. As part of this plan, he and his children were the owners and partners in the partnership. When his son had financial problems and filed for bankruptcy, Mr. Anderson had to pay $80,000 to buy the partnership interest out of the bankruptcy. The asset protection planner declared this a victory because the partnership interest was worth much more than $80,000. Mr. Anderson said, “I shell out $80,000 due to my son’s bankruptcy, and you call this asset protection?”
Example B. Mr. Walton transferred a home and some cash into a 541 Trust™ at a time when he had no liability problems. Later, his business went bankrupt and he too fell into personal bankruptcy. The bankruptcy questionnaire asked him to disclose everything he owned. He did not need to disclose the 541 Trust™ or the home and cash because he didn’t own it. (See 11 USC 541(b)(1)). Thanks to the 541 Trust™, the Waltons came through bankruptcy without losing their savings and their home.
2. Must be Effective under the laws of all 50 States and the Bankruptcy Code. Many people create Wyoming LLCs or Nevada corporations based on false advertising which leads them to believe that they can take advantage of another state’s asset protection laws by filing an entity in that state. Recent case law shows that relying on the laws of another state may give you a false sense of security.
Example A. Mr. Robbins created several Delaware LLCs believing that Delaware LLCs have better charging order protection. However, when he was sued in Utah, the Utah court ignored Delaware law and used Utah’s charging order law which allows foreclosure of an LLC interest as well as court orders for accountings and directions which give creditors greater access and control over the LLC. (American Institutional Partners, LLC v. Fairstar Resources, Ltd., 2011 WL 1230074 (D.Del., Mar. 31, 2011) (“Utah law applies to all execution proceedings in this matter, including the foreclosure of a member’s interest in a limited liability [company], whether such company is domestic or foreign”).
Example B. Thomas Mortensen, a resident of Alaska, created an Alaska asset protection trust and funded it with cash and real estate. Four years later, he went bankrupt. The bankruptcy court applied federal bankruptcy law instead of Alaska law, noting that “Only five states allow their citizens to establish self-settled trusts. Section 548(e) [of the Federal Bankruptcy Code] was enacted to close this “self-settled trust loophole.” Battley v. Mortensen, Adv. D.Alaska, No. A09-90036-DMD, May 26, 2011.
3. Must be Proven By Court Cases. If you search the internet for asset protection strategies, you will find that many asset protection providers recommend offshore trusts, claiming that they are bullet proof. These providers completely ignore the fact that US courts have a plethora of precedent to authorize them to order a person to repatriate assets or go to prison. See FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999); SEC v. Bilzerian, 131 F. Supp. 2d 10 (D.C. 2001); SEC v. Dunlap, 253 F. 3d 768 (4th Cir. 2001); In re Lawrence, 279 F.3d 1294 (11th Cir. 2002); Bank of America v. Weese, 277 B.R. 241 (D.Md. 2002); BankFirst v. Legendre (2002); U.S. v. Plath, 2003-1 USTC 50,729 (U.S. District Court, So. Dist. Fla. 2003); Eulich v. U.S., (N.D.Tex. Case No. 99-CV-01842, August 18, 2004); U.S. v. AmeriDebt, Inc., 373 F. Supp. 2d 558 (D Md. 2005); Morris v. Morris, Case Nos. 4D04-3812, 4D04-4621, 4D04-4763, aff’d Appeal No. SC05-1166 (Fla.S.Ct. April 13, 2006); JSC Foreign Economic Association Technostroyexport v. International Development and Trade Services, Inc., Dist. Court, SD New York (2006); Morris v. Wroble, Case No. CIV-O6-80479 (S.D. Fla.) aff’d Appeal No. 06-80452-CV-DTKH (11th Cir. Nov. 16, 2006); Barbee v. Goldstein (In re Reliance Fin. & Inv. Group, Inc.), 2006 U.S.Dist. LEXIS 82945; Chadwick v. Green, Civ. No. 09-2134 (Del. County Ct. Com. Pl. July 10, 2009); SEC vs. Jamie Solow, 2010 WL 303959 (S.D. FL., Jan 22, 2010); SEC v. Cook, Dist. Court Minnesota 2010; Advanced Telecommunication Network, Inc. v. Allen, D.C. Docket No. 05-00770-CV-ORL-19-JA-DA (11th Cir. 2011); US v. Adams 82 F. Supp. 2d 229, District Court (ND West Virginia 2011).
Offshore trust promoters also claim that a court will not threaten you with jail time for contempt unless you are a criminal or you make a last second fraudulent transfer. This completely ignores the oft-repeated court rulings to the contrary: “[I]t is irrelevant that the settlor was solvent [at] the time of the creation of the trust and did not intend to defraud creditors for ‘it is against public policy to permit the settlor-beneficiary to tie up her own property in such a way that she can still enjoy it but can prevent her creditors form [sic] reaching it’.” In re Portnoy, 201 B.R. 685 (1996), citing Herzog v. CIR, 116 F.2d 591 (2d Cir. )). Also see In re Brooks, 217 B.R. 98 (D.Conn. Bkrpt. 1998), In re Cameron, 223 B.R. 20 (Bankr. S.D. Fla. 1998), and In re Lawrence, 279 F.3d 1294 (11th Cir. 2002).
In a recent case (Indiana Investors, LLC v. Hammon-Whiting Medical Center, LLC No. 45D02-0807-CT-201 (Lake Superior Court, Lake County, Indiana); Indiana Investors v. Victor Fink, No. 12-CH-02253 (Circuit Court of Cook County, Illinois, Chancery Division), Victor Fink transferred assets to a Cook Islands trust provided by one of the popular asset protection providers found on the internet who claimed that the control could be shifted offshore in the event of duress. The plaintiffs were able to obtain temporary restraining orders which prevented the trustees and protectors from shifting the control to the offshore trustee (South Pac Trust International, Inc.) and the bank accounts were all frozen.
Unlike all the offshore trust providers, we use asset protection strategies that are upheld by recent court cases. Unlike our competitors, we can actually send you court cases where the trusts that we have created have been upheld in court.
4. Must be Simple to Understand, Implement, Modify and Unwind. I would not want an asset protection plan that is expensive, difficult to maintain, or difficult to get out of. We can send you diagrams, examples, and answers to frequently asked questions that make the 541 Trust™ easy to understand. The 541 Trust™ is so simple to implement that we can usually complete the entire plan within 5 days. The 541 Trust™ involves little to no ongoing maintenance. Most importantly, the 541 Trust™ is easy to modify or unwind if your circumstances change.
5. Must Have an Effective Equity Stripping Plan. If you search the internet for asset protection strategies, you will see that almost every provider talks about equity stripping, but their equity stripping plans fail to protect the majority of the equity because the lien is based on a minimal loan or a line of credit. We have a better equity stripping strategy which protects the entire value of the asset at all times.
Example A. Mrs. Johnson owns an apartment building in an LLC. She puts a lien on the apartment building in order to protect it. The lien is based on a line of credit from a friendly source. If a customer slips in her parking lot and sues the LLC, they can get all the equity except for the amount actually borrowed on the line of credit. The lien was a smokescreen, but it was not an effective asset protection strategy.
Example B. Mrs. Johnson owns an apartment building in an LLC. She creates a 541 Trust™ which owns an Investment LLC. The Investment LLC puts a lien on her apartment based on our exclusive equity stripping strategy. If a customer slips in her parking lot and sues the LLC, they cannot get any of the equity because it is completely protected by a legitimate lien on the entire value of the asset. All of the equity in the apartment building is protected for as long as the lien remains in place.
Please call us at (801) 765-0279 for a free consultation.