Is Asset Protection Bullet Proof?

by | Aug 4, 2020

We are often asked: is asset protection bullet proof?

Our experience tells us that when confronted with an asset protection structure, approximately 30% of plaintiffs and creditors will choose not to pursue our clients’ assets. The plaintiffs and creditors simply walk away. Walk away from pursuing the lawsuit in the first place, because they cannot find assets. Walk away from a pending lawsuit because they are convinced by our clients that there are no assets to collect against. Walk away from an existing judgment because the debtor is or appears to be judgment proof.

What happens in the remaining 70% of cases? Approximately 95% of the remaining cases settle. They settle on terms that are now a lot more favorable to our clients. But the creditor is paid something. The creditor is given some incentive to walk away from our client. In the remaining 5% of those cases where the creditor did not walk away or settle (which is approximately 3.5% of all cases), our structures are tested. Creditors pursue fraudulent transfer attacks, or try to pierce the corporate veil of legal entities and trusts. Sometimes they are successful, and sometimes they are not.

Statistically, engaging in asset protection planning is an easy decision to make. If you do nothing to protect your assets, you have a zero chance of success. If you do something to protect your assets, maybe the plaintiff will challenge that, and if they challenge that, maybe they will be successful. Even if a creditor is successful at the end, to our client there is rarely a downside – if they did nothing they would have also lost all their assets. Given that challenges are mounted in about 3% of cases, and not all such challenges succeed, what is the downside of trying? As the great Wayne Gretzky once said: “One hundred percent of the shots you don’t take do not go in.”

If you are considering asset protection, call us today for a custom solution designed to meet your needs.

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