ASSET PROTECTION – Lessons Learned
For pretty much 35 years, I have represented commercial real estate investors, developers and business people. Most of that time has been spent helping them acquire, fund, expand, develop, manage and grow their assets and organizations. For the past 5 to 6 years, as we have struggled through the Fantastic Recession, a huge amount of my time has been spent helping clientele keep their assets.
Growing up, I was steeped in the practical look at that it is not so much what you acquire that counts, but , somewhat, what you keep. My parents and grandparents were not in the property business to make others wealthy. They were playing real life Monopoly®. They played to win. It was less about funds for money’s sake than it was a means of keeping report. Invest. Reinvest. Expand the bottom line. Control your losses. To remain what you acquire.
A key concern was always asset safeguard. Perhaps this was a byproduct of my grandfather’s activities during the Great Depression. He did well, while others around the dog lost everything. A theme underpinning virtually all investment strategies was going to structure our business affairs into risk remote pockets, so that if bad things happened to one project, or perhaps with one business, the damage could be contained. My father would certainly compare it to the structure of his ship inside the Navy during World War II. If the hull has been damaged, water tight bulkheads could contain the damage to avoid ruining the entire ship.
This brings to light one of the great misguided beliefs about asset protection. A sizable number of people start with the belief that the aim of asset protection is to prevent all creditors from ever before getting any of their assets or income. Realistically, it doesn’t perform that way. Not even if you use an offshore Asset Protection rely on or other advanced asset protection devices. To also approach making that happen, you would have to create this kind of tangled weave of trusts and limited liability agencies, and give up so much control, that you would never be able to perform your business or live your life as a functioning human being. It would be hugely expensive, and it still wouldn’t protect everything.
Asset safeguards need not be particularly complicated or expensive. Basic purchase protection strategies can be implemented that do not get in the way of your business or everyday life. Although advanced asset protection preparation can utilize off-shore trusts and off-shore bank accounts, these tools and techniques are the exception rather than the rule. They are offered if the situation warrants, but for most people there is seldom a legitimate reason to go to such extremes.
Sadly, a significant number of business real estate investors and business owners, and many of their lawyers and accounting firm, pay almost no attention to even basic asset protection methods. This was never more obvious, and unfortunate, than through the Great Recession we have been working through over the past five to six yrs. Otherwise sophisticated and historically successful commercial real estate investors, designers and business owners have lost virtually everything. What makes this a lot more tragic is that, with even modest asset protection considering, many of these catastrophic financial disasters could have been averted.
Clients regarding mine who planned ahead by structuring their extramarital relationships for asset protection have survived this recession and are generally well positioned to move forward to take advantage of emerging opportunities because the economy improves. Many who did not are faced with starting up over.
Why not think ahead to protect your assets? You happen to be under no legal obligation to structure your economic affairs in a way that makes it easier for banks and other creditors for taking virtually everything you own. Your obligation is to your family, and yourself, to make sure your life’s work and life’s financial savings are not lost in the event of financial calamity.
A key point about assets protection is that, to be effective, it must be done well in advance. Once the commun fan has been hit, it is likely too late. There may always be some modestly effective strategies to be employed to minimize damage, yet real asset protection with powerfully effective outcomes starts off when there are no (or, at least, very few) thunderstorm clouds on the horizon.
Once you are in financial trouble, it is often too late. Transactions of assets for less than fair value can be set aside as being a preference in bankruptcy, or as a fraudulent transfer. The particular “fraud” in “fraudulent transfer” is not traditional fraud. It truly is simply the transfer of an asset for less than fair value for that principal purpose of avoiding creditors.