Three Steps to Consider for Asset Protection

Physician's Money Digest, October 2006, Volume 13, Issue 10

Asset protection is the process of arrangingyour affairs to minimize the risk of yourwealth being seized, either by prospective litigantsor future creditors. Nowadays, asset protectionis on every physician's mind—or should be. Thefollowing are three steps that are crucial to successfulasset protection:

Step 1. The most basic but important step is to protectyour assets before the need for protection arises.There is no use in setting up a safety net after you falloff the trapeze. Make the decision, and take action.

Step 2. Educate yourself so you can understandwhich asset protection strategies work and whichones do not. Suppose your goals are to make yourassets creditor-and-judgment-proof, but you are conservativeand don't want to invite future problems.As a general rule, stay away from traditional offshoreprotection trusts. Any asset protection attorney willtell you these are a target of the IRS. If you establisha trust, you are required to notify the IRS, and just bydoing that, you may become a target for examinationby the IRS. The IRS takes the position that an offshoreasset protection trust means that you are tryingto hide something.

Step 3. Look for jurisdictions that offer naturallitigation protection standards, such as Switzerlandand Liechtenstein. For example, if you owned a Swissannuity, Swiss law would protect you against debtcollection procedures or creditors even if a creditorwere to get a foreign judgment or a court order thatexpressly decrees the seizure of your policy—the policymay not be seized in Switzerland, nor could it beincluded in the estate in bankruptcy. Most peoplemay not even be aware of an entity such as the Swissannuity. Swiss annuities are similar to US annuities inthat they are simply a contract between an insurancecompany and the policy holder. The major differencelies in Switzerland's strict privacy laws, which makethe Swiss annuity creditor-and-judgment-proof.Swiss insurance companies do not issue reports toany governmental agency upon the initial purchaseof the policy, the payments made into it, or the interestand dividends earned. Switzerland does not honorUS judgments, so you can invest in a Swiss annuityfor asset protection. And the IRS may regard theseagreements with less suspicion, since there are legitimatereasons for someone to invest in an insurancecontract. Consult with your legal advisor or find onewho has experience in and understands the rules andthe proper structures for protecting assets andwealth. The best defense is to use a variety of estateplanning tactics and keep your assets out of reach ofjudgments before the need arises.

Darrell Aviss is managing director of SwissGuard International,GmbH, a Zurich-based financial consulting firm that providesSwiss wealth management and asset protection planning tohigh-net-worth international investors. He welcomes questionsor comments at 800-796-7496, or for more information,