Lawsuit Lottery: The Hijacking of Justice in America
Think you know how to keep your money safefrom predators? If so, you're a rarity. Becauseasset protection is a relatively new legal tool,misconceptions and myths about these legalproducts abound. If you think you're the only onewho's in the dark, here's a scary fact: Your lawyer maynot know much about it, either. That's the word fromDouglass S. Lodmell, coauthor of the book (World Connection Publishing; 2004).
According to Lodmell, "A Prince & Associates studyfound that of 227 lawyers surveyed, only 16.3% of themdescribed themselves as authorities on asset protectionplanning, and an alarming 73.6% of them said theyneeded to know more about it."Lodmell offers the following12 myths about asset protection:
1. Asset protection is only for those with a very highnet worth. Many of the top asset protection legalproviders base their protection and fees on the net worthof their clients. A client with a net worth of $5 millionwon't be nearly as affected by a $1-million lawsuit judgmentas a client with a $1-million net worth. The clientwith the net worth of $5 million can pay the judgmentand continue to live the life they are accustomed to.Conversely, a client with a $1-million net worth whogets a $1-million judgment is literally bankrupt, and thelife of their family will change drastically.
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2. Asset protection is illegal. If properly implementedby a qualified attorney, asset protection is a powerfullegal tool that can protect clients from future litigationjudgments. In fact, the regularlyreports on the legal benefits of asset protection in thewake of the nation's frivolous lawsuit crisis. The basicpurpose of asset protection is to balance the scales of justicein connection with lawsuits. To the extent that youdo not seek to defraud your present known creditors,there is nothing illegal or immoral in placing some ofyour assets beyond easy reach of predators.
3. Asset protection can save on taxes. Asset protectionshould not be considered a tax savings plan. Ifan asset protection planner promises you that theywill save you taxes, be very careful before youengage their services. Tax planning and asset protectionrarely go together, if ever. Unlike tax-neutralasset protection plans, those that attempt to get a taxbenefit may draw future IRS scrutiny.
4. The IRS will audit you if you implement asset protection.Setting up asset protection planning through aqualified expert will not make you more susceptible toan IRS audit. In fact, there are additional forms you maybe required to file with your asset protection tools thatwill actually help the IRS recognize that you have theprotection properly and legally put in place.
5. You lose control of your money. With properlegal asset protection planning, you do not lose controlof your money. Although the legal tools andplanning may seem confusing at first, the net effectof a good plan will always leave investors in the positionof enjoying their assets.
6. Onshore planning is as strong as offshore planning.Many planners and states claim their family limitedpartnerships (FLPs) or newly devised domestic assetprotection trusts provide complete asset protection.While these onshore plans are effective to a certain level,they do not offer maximum protection. These plans runfrom fairly effective to only marginally effective. Becausethey are still governed on US soil, they do not offer completeprotection and are subject to the Full Faith andCredit Act, which essentially states that a judgmentissued by the courts in any state is valid and collectiblein every other state in the United States.
7. You are fully protected with just an FLP or corporation.There are many asset protection planners whoclaim that an FLP is all that is needed to properly protectyour assets. However, this is onshore planning, andyour wealth is still governed by US jurisdiction. Manycompanies tout FLPs as being successful asset protectionfor the simple fact that they do not have access tooffshore planning, or do not have the expertise to completea full offshore plan. Rather than advising you onthe best plan, these companies may actually be sellingyou only what they already have.
8. You must keep active foreign bank accounts at alltimes. A foreign bank account is not required unless youactually need to move assets offshore. In most cases, themassive deterrent factor of having the appropriate offshoreplanning in place is enough to dissuade anyoneadvancing a frivolous or meritless lawsuit. In other cases,it allows a doctor to force a settlement on reasonableterms as a plaintiff has almost unreachable hurdles toforce a collection from a properly drafted plan.
9. If triggered, the owner must flee the country.Asset protection planning is never triggered to an offshoreaccount unless there is legal action or judgment. Inthe event that the planning is triggered to an offshoreaccount, only the ownership of the money leaves thecountry and the individual is not required to leave theUnited States. There is no illegal action taking place thatwould require the physician to follow their money.
10. Asset protection can be implemented after beingsued. The only asset protection planning legally recognizedby the courts is planning that is set up before anythreat or serving of a lawsuit. If you have been servedwith lawsuit papers or believe that a lawsuit is imminent,it is most likely too late for asset protection planning,and a US court would likely pierce the protection by callingthe transfer fraudulent conveyance.
11. You can protect yourself by transferring all ofyour assets to your spouse and/or children. Transferringall of your assets to your spouse and/or children will notprotect you from frivolous lawsuits. Suppose that youtransfer all of your assets to your 16-year-old son whocauses an auto accident after getting his driver's license.Several other cars are involved in the accident and severalinjuries are incurred. Chances are high that the otherparties will come looking for the driver with the deepestpockets. If your son "owns"your house and business, asympathetic jury will undoubtedly take the possessionaway from your son to teach him a lesson for his recklessdriving. The same holds true for spouses, parents,and even your friends.
12. You are not a lawsuit target. Lawsuits areAmerica's new favorite pastime. In fact, it's statisticallyeasier to win a multimillion-dollar lawsuit than it is towin the lottery. With more than one lawyer for every292 US residents, the number of lawsuits filed everyday will continue to rise. No one is safe from litigation,especially if their net worth is over $250,000.