Ways to Protect Your Assets
 
By:
Jim Bennett
Date:
05/09/2000


11 Requirements of a Powerful, Effective Asset Protection Plan
Requirement #1: Protect your assets by keeping them offshore.

The United States has a highly unusual judicial system. It is different from judicial systems in most other countries in at least three ways: (1) It is easy for predator-plaintiffs to sue you. (2) You can be sued for just about anything predator-plaintiffs and their lawyers can dream up. And (3) predator-plaintiffs don’t need to pay their lawyers in advance because, in most cases, the lawyers work for a percentage of whatever they can squeeze out of you.

Our legal system is known around the world as being plaintiff-friendly. This means that when you get sued, the presumption is that you must be guilty or the predator-plaintiff would not have sued you. And if the Robin Hood jury thinks you have more money than the predator-plaintiff (and you probably do), the jury will gladly take some of your money and give it to the predator-plaintiffs and their lawyers.

Often, whether this is right or wrong doesn’t matter. The poor plaintiff is a sympathetic victim. They jury thinks, "Certainly this poor man or woman wouldn’t make up this terrible story." And since the jury relates to the plaintiffs, the predators and their lawyers win and win big! The jury then goes home feeling good because they did their duty: they took from the rich (you) and gave to the poor (plaintiffs).

What’s more, when it comes time to collect, the government is happy to help the predators and their lawyers get your money. The government provides many powerful tools they can use to collect the spoils of battle.

Bottom line: In the United States, you cannot find even one safe place to put your money. There are too many ways for predators to get it. And what’s outrageous is that they use our judicial system to help them!

The predators, together with their lawyers on one side and judges on the other, will pick you clean of every dollar you have stateside, regardless of how you try to protect yourself.

Does this happen in every case? No. But it happens often enough that you should take every possible step to prevent it.




Requirement #2: Make sure your asset protection portfolio gives you a high level of financial privacy.

Today’s economic predator-plaintiffs and their lawyers follow trails of financial information the way sharks follow blood in water. They know that sooner or later the trail will lead to a victim – you! And they know that if they attack long enough, and hard enough, from every possible angle, they will eventually win.

And the longer you defend yourself, in your last-gasp effort to survive, the more blood you release into the water. This blood, in turn, attracts more sharks -- perhaps dozens of sharks -- each of which will take a bite from your hide until you are left with nothing.

And, if it’s possible to make matters worse, these predator-plaintiffs and their lawyers – even before they win their lawsuit – will seize your assets, tie your business and stomach in knots, and do everything possible to cripple you with the hopes of forcing an early and hefty settlement.

Here’s how they find your trail of blood: Unless you use only cash, every financial transaction you conduct in the United States is recorded and available to others, including predator-plaintiffs, their lawyers and their private investigators.

Have you ever seen your credit report? Doesn’t it tell a lot about you? Do you know how easy it is for a predator-plaintiff to get a copy? A private investigator or lawyer can get your credit report by doing nothing more than making a phone call.

Even worse, your U.S. bank records can be subpoenaed in any lawsuit where predator-plaintiffs can show those records have some relationship to their complaint.

You might remember that Ken Starr subpoenaed Monica Lewinsky’s bookstore buying records. Is this America or Nazi Germany? A bookstore owner in Washington tried to fight this for awhile, but finally gave up. There is no reason that any predator-plaintiffs can’t do the same to you.

Worst of all, anyone can log onto the Internet and find out about all the real estate, boats, planes and cars in your name. Anyone with Internet access can surf to www.knowx.com and get a record of every bad thing that ever happened to you that was ever recorded by the government. Divorces, marriages, boat and airplane registrations, tax liens, UCC filings, lawsuit filings, bankruptcy filings, corporate directorships, corporate officerships, and so on.

But that’s child’s play compared to DBT Online. You can’t get this one on the Internet yet, but anyone who says they are a lawyer (no background check) can sign up. Take the knowx offering and add the names and addresses and background information on all your neighbors and all the people who work near you, and on your spouse and former spouses, all neatly cross-referenced in a tidy report. They also throw in access to your credit bureau reports.

Then, of course, there is Dun & Bradstreet. Find out every company with which you are an officer or director and that company’s financial condition. Company financial trouble? The stigma leaks onto you.

And it’s cheap! For less than $100 you can compile a complete dossier.

U.S. credit card issuers go crazy with your purchase records. Does the local vice squad want the names of everyone in town who has frequented an establishment they decide is unsavory? They can get it from the credit card company if you charged your purchase. Is your wife suing you in a divorce and interested in your dalliances on your business trips? No problem. Quick subpoena to the credit card company.

Fortunately, you can get substantial privacy by putting your assets into an offshore asset protection plan. Why? Because offshore financial institutions and governments respect your privacy. In fact, one of their main sources of income is from Americans who want to protect their assets. So they are going out of their way to provide you with the privacy and security you want and need.

Your transactions with an offshore credit card will never be reported to a credit bureau, even if they are used for purchases made in the U.S. A U.S. court can’t help predator-plaintiffs get bank records or seize assets in an offshore bank, as long as the bank does not have U.S. offices. The offshore bank will laugh at any attempt.

One last point about privacy: Keep your mouth shut. Don’t use your system as a subject for cocktail party chatter. Don’t discuss it with your golf buddies. You may not even want to discuss it with your kids or spouse. Consider discussing it only with your lawyer and accountant. And, as I've advised elsewhere, make sure you properly and accurately disclose it to I.R.S.




Requirement #3: Make sure your asset protection portfolio contains an international trust.

An international trust is a special protective trust that is governed by the laws of a foreign country that aggressively protects your assets. The international trust document is much longer than the typical U.S. trust. This is because it protects the trust against attack in several ways, each of which is critical to protecting your assets.




Requirement #4: Make sure your trust contains a flight clause.

If trouble breaks out in the country where your trust is based, the flight clause requires the trustee to move your trust to a different country. An example of trouble is if one of your economic predator-plaintiffs or their lawyers actually travels to your trust’s country to attack the trust.

If necessary, the trustee can move the trust more than once. In fact, the trustee can move your trust all over the world. Your adversary will have to chase your trust, and he will eventually tire and settle.




Requirement #5: Make sure your trust contains a duress clause.

Under the duress clause, the trustee is prohibited from following your instructions if you are in trouble. For example, let’s say a judge orders you to instruct the trustee to send your money back to the United States. You write a letter to the trustee saying, "I have been ordered by the court to instruct you to send all my money to the court. I am writing this letter in compliance with the judge’s order. Please send all my money to the District Court of Middlesex County."

Your trustee will read your letter, put it in a file and ignore it. Since you are under duress, the trustee will not follow your instructions. Note, however, that you followed the court order. You instructed the trustee to act. But the trustee must act according to the terms of your trust, which dictate that he ignore your request. You did what the judge told you to do. And, thanks to your offshore asset protection plan, you still have your money.




Requirement #6: Make sure your trust contains a spendthrift clause.

The spendthrift clause protects your beneficiaries against their own problems. It keeps their creditors away from your money and keeps them from pledging their interest in the trust in exchange for loans.

(Note: Your international trust should also contain a number of other clauses and provisions designed specifically to provide the worldwide asset protection you need. Please understand that to help my clients maintain their financial privacy and to build a firewall against predator-plaintiffs, I cannot disclose further details about how I designed their international trusts.)




Requirement #7: Make sure your as asset protection plan contains an international limited liability company.

Limited liability companies are like limited partnerships, except that no one has unlimited liability (in a limited partnership, the general partner has). LLCs have "members" and "managers". The members are like limited partners, who take no part in the management of the LLC. The LLC, like the international trust, is formed under the laws of a foreign country.

In offshore asset protection plans that include an LLC, the LLC holds the actual trust assets. Bank accounts, stocks and other investments are in the name of the LLC.

The foreign county’s LLC law makes it another aggressively protective vehicle. It provides one more firewall between potential creditors and your money because the trust acts as yet another firewall. Also, it allows the LLC to hold property in countries that don’t recognize trusts, such as Switzerland.




Requirement #8: Make sure your asset protection plan contains an international private trust company.

A private trust company manages the trust and the LLC. You control the private trust company until you get into trouble. Then your competent, trusted backup professionals take over until the storm blows over. Many asset protection attorneys insist that you give up control immediately to a trustee. In fact, this isn’t necessary. You should transfer control only when you have trouble brewing. When your trouble goes away, you again take control of your assets. Note: Your assets are out of your control only during times of trouble, which is precisely the way your plan is supposed to work.




Requirement #9: Make sure your asset protection plan contains a Delaware LLC

The Delaware LLC does very little. It is necessary only because IRS requires that foreign trusts have a U.S. agent it can call on for information. You are permitted to have an LLC for this purpose. The LLC is simply a shell that may do nothing but fulfill this function.




Requirement #10: Make sure you get a second passport.

Your second passport is the emergency weapon you use (as a last resort) if a U.S. judge threatens to throw you in jail for not bringing your money back to the U.S. so the judge can give it to your adversary. You thought the U.S. abolished debtors’ prison decades ago. Unfortunately, that’s not true. Your second passport is your secret weapon. It allows you to come and go as you please, even after the judge’s demand that you turn in "your passport".

Several pleasant countries can provide you with a second passport, either in exchange for an investment or because you have some birth, marriage or other family rights to citizenship. When you have a second passport, you have a comfortable refuge in which to weather the storm (and enjoy your money) if things get really messy.




Requirement #11: Make sure you maintain liability insurance coverage.

Liability insurance is a mixed blessing. It can provide valuable protection, if your policy covers what you are being sued for. But insurance policies are written by lawyers and they often don’t cover what you might expect. For example, do you know that the typical comprehensive general liability policy doesn’t cover employment liability claims? Nor does it cover environmental cleanup claims. What’s more, it may not cover punitive damage awards, which could easily mount into the millions, or even the tens of millions!

If you are "lucky" enough to be sued for something that is covered by your policy, you may discover that your policy does not cover the full amount of your potential economic exposure. Defendants often learn that predator-plaintiffs are suing for damages that far exceed their policy limits. If this happens to you, and if the predator-plaintiffs are successful, the court will order you to pay the money out of your checking account.

Also, you have another, more subtle problem. Plaintiffs’ lawyers have investigators who can discover how much insurance coverage you have. The more insurance you have, the better target you are for predator-plaintiffs and their lawyers.

Still, insurance does have value. One valuable benefit is that it will cover the costs of your legal defense if you are covered for the predator-plaintiff’s claim. So liability insurance is an important and necessary part of your asset protection plan. Insurance alone, however, is simply not sufficient.

In summary, what makes your system so powerful? When you have all these requirements in place, here are the walls predator-plaintiffs and their lawyers must break down:

1. The predator must discover that you have an offshore asset protection plan.

2. The title to your offshore asset protection plan is not in your name.

3. The protective country does not recognize foreign judgments.

4. The protective country has a short statute of limitations on fraudulent conveyances.

5. The protective country has a heavy burden of proof on fraudulent conveyances.

6. The duress clause keeps your trustee from complying with your wishes.

7. The flight clause compels your trustee to move your trust into another country if trouble brews.

8. You have a second passport so you can leave the U.S. to prevent the judge from jailing you for contempt of court.

Bottom Line: When predator-plaintiffs and their lawyers see how many walls they must break down to get your money, the lawyer will advise his client (the predator) that you have successfully created a near-impossible situation. If the predator gets anything from you, it will be whatever you and your lawyers negotiate as a token settlement. Then the plaintiff's lawyers will be "movin' on" to find another target whose assets are not as well protected.

Here's an example of a token settlement that was cited in Forbes magazine in the article, "Pulling Up the Drawbridge":

          A physician faced over 200 malpractice claims after being the subject of a negative story on local TV. Fifteen of the suits weren't covered by insurance. The physician's total exposure on those claims was $7 million, but because most of his assets had been transferred to a Cook Islands trust, he wound up settling the suits for $18,000. The plaintiff lawyers didn't want to go to trial because any judgments in their favor would probably have been uncollectible.
Can you imagine what the court could have ordered the physician to pay if he had not had an offshore asset protection plan? Frightening, isn't it.


7 Secrets of Choosing the Country Best Able to Protect Your Assets

Your offshore asset protection plan should rely on countries where the philosophy is, "You deserve to keep your money unless someone can show an extraordinarily good reason to take it from you." When you ask a lawyer to set up an offshore asset protection plan, make sure you follow these secrets:




Secret #1: Make sure you choose a country that refuses to enforce foreign judgments.

If the country does not enforce foreign judgments, then you have built the first firewall around your assets. This means the predator cannot take a judgment from a U.S. court and get the foreign country to help collect it. If your adversary tries, your offshore protective country will tell him that the paper his judgment is written on would be better used for wrapping fish.




Secret #2: Make sure you choose a country that has a short statute of limitations on fraudulent conveyances.

A statute of limitations is a law that controls the number of years after which someone may not challenge something you did. A fraudulent conveyance is the transfer of assets with the intention of keeping your creditors from getting them. If the statute of limitations on a fraudulent conveyance has passed, no one can challenge your transfer, regardless of your intentions.

You should create your offshore asset protection plan in a country that has a very short statute of limitations on fraudulent conveyances. This means that even if you did transfer your assets after you were sued — which I don’t recommend — the predator-plaintiff who wants your money would not be allowed to raise that claim because the statute of limitations has passed. If a country has a very short statute of limitations, the predator-plaintiff will have very little or no time to file a new fraudulent conveyance lawsuit there. A short statute of limitations builds the second firewall around your assets.




Secret #3: Make sure you choose a country that has a law requiring a heavy burden of proof in fraudulent conveyance lawsuits.

A heavy burden of proof builds the third firewall around your assets. If your adversary is lucky enough to get his fraudulent conveyance lawsuit filed in your offshore country within the time limit, he will still have to prove that you knew the predator had a claim against you when you transferred the money. The heavier the burden, the better for you. A good asset protection country forces the predator to prove this beyond a reasonable doubt, which is the heaviest burden there is.




Secret #4: Make sure you choose a country that has a law that requires strict confidentiality.

Offshore protective countries take secrecy very seriously. In many countries, bankers or trustees who violate confidentiality laws are subject to criminal prosecution punishable by imprisonment. Trust lawsuits are also heard in secret and the records are sealed.




Secret #5: Make sure you choose a country that is politically stable.

The last thing you want to do is to set up your trust or LLC under the laws of a country that suffers a coup by communist guerrillas who decide to nationalize all assets in international trusts. Even if this happened, your plan would keep you from losing your money (It would be in a Swiss bank, for example.) But you might face considerable headaches straightening out your claims.

Fortunately, a country doesn’t need to be big or rich to be politically stable. The Bahamas, for example, has enjoyed centuries of political stability.




Secret #6: Make sure you choose a country that has an advanced communications infrastructure.

Why is this important? You need a fast, reliable communications system so you can reach people in your protective country on a moment’s notice. You may need to get things done quickly, and you don’t want to worry about a communications breakdown.




Secret #7: Make sure you choose a country that has an adequate number of qualified local professionals.

You need skilled local lawyers, in case a predator-plaintiff tries to make trouble there. And you need competent, trustworthy advisors you can select to fill important roles in your asset protection plan, such as a local trustee.



Source:
Jim Bennett
URL:
http://www.jim-bennett.com/smartways/11require.htm
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