"Guaranteed" Asset Protection? Beware Misleading Promotions

by Brian Mahany

(see all our posts at www.mahanylaw.com - weekly analysis and insights on asset protection, white collar crime and fraud recovery)

Hardly a week goes by without seeing a newsletter or advertisement promoting the benefits of offshore accounts. If done for the right reasons, both offshore investments and offshore accounts make sense. (Remember, there is a difference.) Certainly, these types of investments can provide diversification and minimize risks of losing one's wealth to unforeseen creditors. Unfortunately, these promotions often suggest they offer "guaranteed" or bullet proof protection from US courts and creditors.

Earlier today I was reading the monthly newsletter from a prominent asset protection professional. He recommended U.S. citizens open an account at Saxo Bank (Denmark) utilizing a Belize International Business Corporation (IBC) or a Nevis LLC. Why? In his words, "If for no other reason, it is a good idea to have the account for diversifying your currency and holding it outside the reaches of the U.S. court system." And therein lies the problem.

Foreign assets may be outside the reach of the government and creditors but if the beneficial owner of those assets is a U.S. citizen, the court may well be able to reach those assets. Many times we see courts order people to repatriate their assets. Disregard such an court and find yourself in contempt of court (and jail).

Does having ownership of these assets in a foreign entity help? Unfortunately, not always. If the court can determine who the beneficial owner is (not necessarily the owner of record), the court can often reach those assets through its contempt power.

Sophisticated asset protection professionals can do much to minimize these risks but there is no 100% fool proof method. If you have control over appointment of trustees or if the trustees themselves are subject to the court's jurisdiction, the court can ultimately reach your assets.

What can one do? There are many things you can do to minimize risk. Keeping one's affairs private and dealing with professionals is a good first start.

By keeping quiet, chances are better that the creditor never discovers the beneficial owner of the assets. Using a professional asset protection attorney helps because of the attorney client privilege. Using a company that shamelessly advertises how it offers "bullet proof" protection from courts and creditors is problematic when the creditor or government provides the court with the promoter's advertising materials. Judges are not impressed when presented with materials suggesting they are powerless to reach certain assets.

Many law firms will not engage in offshore asset protection work unless an estate plan is in place. Estate planning is recognized and widely accepted as a legitimate method of protecting one's wealth. Although there is nothing illegal about asset protection, coupling asset protection with an estate plan adds legitimacy to the process and better protects the plan from the challenges of creditors.

Of course, there are many sophisticated tools available to provide even more protection. Utilizing anti-duress clauses, having foreign trustees and having trust protectors in place are all useful tools to be considered.

Asset protection is not something that can be done on a cookie cutter basis. Simply ordering an Hong Kong IBC or Cayman's trust provides little protection. If all you wish is to slow down your creditors, these mass marketed plans may work. But if you want to truly protect your hard earned wealth, seek a professional. Developing your asset protection plan is not something to be left to internet marketers and promoters that make impossible guarantees.

--

Brian Mahany and MahanyLaw concentrates in offshore wealth protection strategies, defending those accused of white collar offenses and recovering monies for victims of fraud. Services throughout the United States. Offices in California, Portland and Milwaukee.