Assets Protection

Assets Protection:

Assets protection is based on the basic principle that any asset owned by a person can be reached by that person's creditor. Assets Protection started coming into prominence in the late 1980s, with the advent and the marketing of offshore asset protection trusts. For example, when seeking to protect a personal residence, there are approximately 7 different options (according to some assets protection articles written by an assets protection attorney-expert Jacob Stein).

From a legal perspective, assets protection jurisdictions have enacted trust laws that are particularly favorable to debtors. However, if the debtor owns assets through a corporation, the debtor’s creditor can seize the shares of stock of the corporation. While it does not afford the debtor a complete level of assets protection for the residence, it makes the residence sufficiently unattractive to a creditor so that in practice, creditors very rarely pursue residences in QPRTs.

The term "assets protection" is commonly misunderstood. Having a legal right to do something does not mean having the actual ability to do so, and does not mean that the pursuit of the transferred assets would be cost effective. For someone who wants real protection, a better option may be an irrevocable trust or an outright sale of the residence. Engaging in after-the-fact asset protection planning may be deemed to be a fraudulent transfer allowing the creditor to set aside the assets protection.