Here's a sobering fact: Every day, 50,000-60,000 lawsuits are filed in the United States! Yes, you read the figures accurately. Do all of these lawsuits have merit? Common sense tells you the answer is no. But does that make any difference if the person sued is you or your spouse?

Just like many of our clients, you wear many hats which could expose you to liability: as a parent of a child who causes injury or damage while driving a car you own; as an owner of commercial or residential property in which an "injured" tenant decides to sue the landlord (you); as an employer sued by your employee for harassment, fraud, unlawful termination, age or sex bias, or some other perceived"injury"; as a homeowner sued for an injury that occurs on your premises; as a host serving alcohol to a guest who leaves your home operating a motor vehicle under the influence. And so on, with lots of hungry lawyers eager to represent the plaintiff on a contingent fee basis. Win or lose, you've lost. Why not plan smart and protect yourself?

At Price & Farrington, PLLC, we don't believe that asset protection is just about avoiding lawsuits. Don't most of us, after all, believe that a lawsuit is something that will happen to the next guy, and not us? The goal of Integrated Estate and Asset Protection Planning is to plan properly in advance to legally safeguard your property and wealth against any undesirable and avoidable diversion of funds or loss of assets - to the I.R.S., a divorcing spouse, a spendthrift child, the government, the courts, the wrong beneficiary, the "right" beneficiary in the wrong way at the wrong time, a con artist, a tax scam or a declining stock market.

Advance Planning Required

Most successful Asset Protection strategies must be in place before financial problems arise. If you make arrangements after the problem arises, you could be deemed to have acted to defraud a creditor, invalidating the "planning" under federal bankruptcy laws or state creditor protection statutes. Therefore, advance planning is essential in this area. If the storm clouds have already gathered, it might be too late to build your shelter.

Goals
Asset protection strategies generally aim to:

1. Isolate and compartmentalize risky assets or activities through legal structures which insulate the owner's other assets;

2. Position part of an owner's net worth in investments that enjoy special protection under the law (e.g., a "homestead", qualified retirement plans or cash value life insurance), and;

3. Build obstacles that make it more difficult for creditors to reach assets.


Strategies

Asset protection comes in a variety of "strengths". Think of the lowest and successively higher rungs on a ladder. Property and casualty insurance might occupy a lower rung, with complex offshore trust transactions occupying the highest rung. Your individual circumstances, goals and personality will determine which techniques are the most beneficial for you, i.e., which rung you need to be on.

Corporations and Limited Liability Companies

If you engage in business activities that give rise to liability or loses, they should be conducted in an entity that insulates you as owner from personal liability for uninsured losses. High-risk activity should ideally be conducted through a separate legal entity so that claims arising from one activity will not jeopardize other activities. Adequate liability insurance for each entity will protect the owner from a court's decision to "pierce the corporate veil" to avoid fraud on creditors.

Real estate should be owned inside an LLC to insulate the owner from personal liability arising from the underlying property. In Washington state, creditors cannot take control of a debtor's interest in a partnership or LLC to enforce a judgment. Their remedies are limited. The creditor cannot seize the entity, force distributions, liquidation or sale of the debtor's interest or take over management.

Trust a Trust
Integrated estate and asset protection planning relies on the use of properly drafted irrevocable trusts to protect assets gifted to family members, hold life insurance, provide 'special needs", support for aging parents, own a personal residence or provide charitable planning.


"Spendthrift" trusts designed properly for a beneficiary can subject the assets to the beneficiary's management while providing creditor and transfer tax protection. Offshore asset protection trusts and domestic, self-settled trusts (set up in Alaska, Delaware, etc.), established in jurisdictions whose laws are designed to facilitate asset protection, are increasingly becoming vehicles of choice. These "Alaska" type trusts are relatively new and do not yet have a proven track record. The cost of establishing and maintaining an offshore asset protection trust can be a practical deterrent. Degree of risk, tolerance for greater complexity, sensitivity to costs and other factors all contribute to the design of an asset protection plan appropriate for you.

The attorneys at Price & Farrington, PLLC will carefully evaluate your circumstances and goals to help you determine the need for and the design of the asset protection component of your integrated estate and asset protection plan.



NOTE: This information is designed to provide a general overview with regard to the subject matter covered and is not state-specific. The authors, publisher and host are not providing legal, accounting or any other advice which purports to be specific to your situation. The contents of this website are believed to be completely reliable. Nevertheless, some material may be affected by changes in the laws or interpretations of such changes since the material was entered on the website. If legal advice or other expert guidance is required, the services of a competent professional in the field of law, accounting, insurance or investments should be sought.

Price & Farrington, PLLC - Attorneys and Counselors at Law
Parkwood Office Center - 2370 130th Ave. N.E., Suite 103 - Bellevue, WA 98005
Phone: 425.451.3583.. Fax: 425.522.4818 ..E-mail: admin@pricefarrington.com

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