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Asset Protection Built on Sand

Asset protection planning is complicated.  While estate and trust law changes very slowly, debt/creditor law can be quite dynamic in comparison.  Good planning needs to take the long term perspective, and avoid a cookie cutter appearance.

Based on my experience, there are a few general rules I follow.

  1.   Pigs get fat, and hogs get slaughtered.  If there are any potential liabilities on the horizon, do not put assets in excess of those potential liabilities into an asset protection structure.
  2.   Stay Home.  A judge in the state of your residence is not going to like (i) an offshore arrangement, (ii) a nonresident domestic asset protection trust or (iii) an LLC or limited partnership organized under the laws of another state.  There is a lot you can do under the laws of the state of residence.  Focus there first.
  3.   Control.  There is an inverse relationship between the amount of control you retain and the effectiveness of your  planning.  Trust planning is most protective with an independent trustee with unfettered discretion over distributions.   Cultivate a close relationship with a financial institution with a trust company.  A corporate fiduciary with whom you have a close relationship can be a significant asset when undertaking asset protection planning.
  4. Business or Estate Planning Purposes.  The best asset protection planning is planning that has the primary objective of meeting a business or estate planning purpose, with the ancillary benefit of asset protection.

If you follow these general rules, then you castle will have a solid foundation rather than a foundation of sand waiting to be blown away in a storm.

 

About Grady Dickens

I created this blog to comment on items of current interest regarding trusts, estate planning, charitable planning and tax law, and share my knowledge and over thirty years of experience as an attorney practicing in Dallas, Texas.