Keeping your assets safe becomes more important as you make more money. Frankly, as you build up wealth and become a bigger name in your industry or area, you also become a bigger target for frivolous lawsuit plaintiffs.
When you’re the owner of a very small business, no one’s interested in taking you to court over a perceived slight. When you own a much larger business and (presumably) have tens of millions of dollars to your name, suddenly more people have bones to pick with you and want to fight out the battle in court.
You can’t guarantee a court outcome, so you need to have different ways to protect your assets from civil lawsuits aside from trusting attorneys’ court debate skills. On the bright side, there are plenty of ways you can take direct control over your asset protection as a high-net-worth individual. Let's take a closer look.
The Importance of Protecting Your Assets from Civil Lawsuits
Think your savings, vacation home, and other assets are safe just because they’re yours? Think again.
Putting your money in a bank account isn't nearly enough to protect that wealth from a civil lawsuit. As you become a more successful businessman, doctor, or other wealthy professional, the number of people who want to sue you will exponentially increase.
While it’s unlikely that most of those lawsuits will be successful, there’s always a chance that some of them can be. If you have a string of bad luck, you could see not just one but several civil lawsuits draining you of the net worth you worked so hard to build.
If you’re successful in your niche or industry, you already know the value of planning ahead and taking matters into your own hands. So you also know that you shouldn’t just wait for disaster to strike. Instead, you can undertake steps to protect your assets from civil lawsuits now and in the future.
And as with the best business plans, the best defensive plans for your assets often involve multiple layers of protection.
Ways to Safeguard Assets from Civil Lawsuits
Here are some basic ways you can safeguard your assets from civil lawsuits. Keep in mind, however, that these methods are not the overall most effective compared to the coup de grace of all asset protection – offshore trusts.
Even so, these strategies and tools can provide meaningful protection to your assets.
Insurance Policies
You should already have insurance policies in place based on your profession and the assets you have under your name.
For instance, if you are a surgeon, you should have medical liability insurance to protect you from accusations of malpractice from your patients or their family members. A good insurance policy will protect you from paying anything out-of-pocket if a civil lawsuit is successful.
Other types of insurance policies you might take out include:
- Professional liability insurance
- Errors and omissions insurance
- Homeowner’s liability insurance
- Umbrella insurance (which incorporates many insurance coverage types under the same policy)
Insurance is a good, cost-effective way to give yourself peace of mind and minimize the assets that a successful lawsuit can take in a single fell swoop.
Asset Transfers
You can also transfer assets from yourself to another person. Malicious litigants can’t seize assets that you don’t legally own. As an example, if you are sued for malpractice, but most of your assets are under the name of your domestic partner, those assets will be safe from seizure.
However, you have to be careful about when you transfer assets. You might be accused of fraudulent conveyance or illegal conveyance if you do so right before a legal action.
Say that you know you are going to be sued by a disgruntled customer of your business. To prevent your assets from being seized, you transfer ownership of your prized car and a few million dollars to your brother. If the court gets wind of this, they could accuse you of fraudulent conveyance or transferring assets for the purposes of not paying a bill/court-ordered damages.
Any asset transfers for the purposes of asset protection should be made early and well ahead of any legal threats on the horizon.
Re-Titling
You can further protect your assets by re-titling property. As an example, if you are married, you and your spouse can own your home as “tenants by the entirety”. This prevents the property from being seized because of personal debts under your name or the name of your spouse.
While re-titling can offer some protection, it’s not foolproof. A determined creditor or plaintiff might still challenge the transfer, especially if it was done shortly before a lawsuit. Thus, re-titling should be considered only as part of a broader asset protection plan.
LLCs and FLPs
LLCs or limited liability companies are popular ways to protect business owners from business liability. When your company is an LLC, someone might sue your company, but your personal assets (theoretically) won’t be at risk of seizure, even if the lawsuit is successful.
Truth be told, LLCs aren’t very defensible, and most knowledgeable lawyers will be able to show that you mixed business and personal assets or funds at some point, rendering this protection moot.
An FLP or family limited partnership is often used to set up a company with family members pooling their resources together while minimizing liability and control. An FLP can protect some family members from liability and asset seizure in the event of a civil lawsuit (though not the family members in charge of the company).
As with LLCs, FLPs shouldn’t truly be relied on for asset protection. Many business owners have discovered that something as simple as using a business credit card for a soda at a gas station is enough to bring down the barrier of separation between people and LLCs and jeopardize their personal assets during a lawsuit.
Domestic Asset Protection Trusts
Lastly, there are domestic asset protection trusts. These are only available in a handful of states. As trusts, you appoint a trustee to manage and oversee the property or wealth within the trust, theoretically preventing seizure by a court.
Unfortunately, domestic asset protection trusts are still very vulnerable to US court orders. Legal precedent is not on your side. But on the bright side, there are trust vehicles you can use for true, reliable asset protection.
Offshore Asset Protection Trusts: Legal Fortresses for Your Estate
Offshore asset protection trusts, also called foreign asset protection trusts, are the ideal means to defend your assets from legal attacks as a high-net-worth individual. Think of these as the fortresses of the trust industry – when they are built with the right architects (lawyers) and overseen by the right generals (trustees), they're practically impregnable to legal assault.
An offshore asset protection trust is set up and managed in a jurisdiction or nation other than your own. Say that you are a US entrepreneur; you can set up an offshore asset protection trust in the Cayman Islands, France, Germany, Saudi Arabia, or anywhere else you may have in mind (though your attorney will likely recommend one place or another).
Because the trust is set up in some other jurisdiction than your own, US courts won’t have any power over the trust and the assets within. Therefore, even if you are sued successfully in civil court, the lawsuit can’t result in you giving up those protected assets under any circumstances.
Why Are Offshore Asset Protection Trusts the Ideal Means to Defend Against Civil Lawsuits?
Offshore asset protection trusts are the best ways to protect your property and wealth against civil lawsuits because they aren’t subject to US jurisdiction. In other words, US courts and lawsuit plaintiffs don’t have any power to demand that you give those assets up.
After all, you don't own them! You can place assets in an offshore trust, at which point ownership transfers to the trustee (a third party that manages the trust and handles any distributions). Even if you receive distributions as a beneficiary, you don't necessarily have the power to go into the trust, change its terms, swap out the trustee for someone else, etc.
This is all contingent on you setting up your trust with the right legal experts, of course. At Dominion, we're experienced in setting up offshore asset protection trusts for high-net-worth individuals such as yourself.
With over a century of experience shared between our members and hundreds of millions of dollars in assets saved, we're the best people to contact when it comes time to set up your own trust vehicle.
How Do Offshore Asset Protection Trusts Work?
An offshore asset protection trust might sound complicated, but it doesn’t have to be, and it works similarly to other trusts you might already use. Here’s a brief breakdown:
- You are the grantor, so you name the other key players in the trust
- You choose a trustee, who administrates the trust and manages its assets, plus handles any distributions as outlined in your trust documents
- You also choose any beneficiaries, which can include yourself, your kids, your spouse, or anyone else you have in mind. The beneficiaries receive distributions from the trust at some later date
That’s it! With an offshore asset protection trust, the assets you put in that trust vehicle are no longer owned by you. They are owned by the trust. This protects them from any debts or civil lawsuits that you might be affected by.
Can a US Court Access a Foreign Trust?
In theory, no, but in reality, sometimes. It all depends on how you set up your trust and which bank you use for the trust’s management.
You see, some banks may have additional branches or subsidiary companies in the US (or whatever other jurisdiction you are a citizen of). If that’s the case, a court could theoretically still access your trust or demand access to its assets through the bank itself, not through the country.
Still, a properly designed, well-planned offshore trust is as durable as titanium for the purposes of asset defense. If your lawyers chose the right jurisdiction for you, and if they selected the right trustee, a US civil lawsuit will be completely ineffective at taking your estate, wealth, or other assets from you.
Setting up an Offshore Asset Protection Trust
Since offshore asset protection trusts are so effective, it makes sense to set one up ASAP. Like with asset transfers, the earlier you undertake this approach, the better. Asset protection trusts take several weeks or months to finalize, so you need to have one prepared and your assets stored within well ahead of any civil lawsuits or legal trouble you anticipate.
To do that, you'll want to speak to asset protection setup specialists, just like the kind we employ at Dominion. When you contact Dominion, we'll:
- Meet with you for an initial consultation. The purpose of this initial consultation is to determine your goals, financial needs, and any stipulations or requirements you have for the trust. Once you complete the consultation, we’ll begin drawing up a unique asset protection strategy that meets all of your needs
- Work with you through the development of your asset protection plan. This will involve setting up the right offshore trust. Our experienced professionals will select the perfect jurisdiction based on case precedent, interactivity with US laws and international statutes, and other factors
- Help you transfer assets to the new offshore trust. Asset transfer is vital, as any assets you transfer into this trust will be there forever or for a long time. Every good offshore asset protection trust is irrevocable, meaning you won’t be able to change it (easily, at least) after it’s set up
- At that point, all you have to do is sit back and let your trust take effect!
With Dominion, your asset protection trust will run in the background of your life and keep your assets secure against any threats you encounter.
Even better, we can set up your asset protection trust so that the wealth within is invested in the right instruments to continually generate new money and keep pace with inflation. This way, your estate doesn’t just languish or gradually diminish in value as the economy changes. It grows in value for the benefit of you and any future beneficiaries.
Contact Dominion Today
In the end, working with Dominion to set up and run an offshore asset protection trust is the best way to safeguard your assets from civil lawsuits now and in the future. In fact, a good asset protection trust will help you not just keep your wealth but build up over time, ensuring long-term financial stability and prosperity for your family.
There’s no need to wait. Our experts can get started as soon as you give us a call, so contact one of our representatives to begin the process.
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