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Asset Protection

Bagula, Riviere, Coates and Associates, LLP

San Diego, Orange County, Riverside and San Bernardino Asset Protection Law Firm

Asset Protection Fundamentals

Over the last few decades, expanding theories of liability and the great proliferation of litigation has given increased emphasis to Asset Protection Planning. Business owners, physicians, other professionals, real estate owners, investors and other individuals of high net worth must always be concerned about the potential liability arising from the operation of their business or professional practice or ownership of their real estate against their personal assets.
We live in a victim oriented society. There is a strong societal tendency to blame misfortune and general ills on some specific person or entity and to attempt to obtain financial remuneration from the targeted defendants. Plaintiff lawyers are always on the look out to take cases on a contingency basis because of the alleged “pot of gold” waiting in the form of expensive jury verdicts at the end of the case. The US court system cannot be trusted with expanding theories of liability and jury prejudice against persons of wealth and influence. The deep pocket theory is ever present when the “have nots” try to pursue claims against the “haves”. There is a multitude of potential creditor claims and because of the tremendous arsenal of creditor remedies, doctors, other professionals, business owners and all persons of some wealth have to properly structure their assets so that they can be preserved and protected. The key element here is proper planning and preparation in advance, which includes not only devising and developing an Asset Protection Strategy, but also properly implementing it with the help of a skilled and experienced attorney.

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For inquiries, please visit our contact page or call (619) 272-4235 or (714) 769-9070. A representative of the firm will call you as soon as possible.

Offshore Entity Formation

An Offshore Entity Formation should only be carried out after proper planning and tax and legal advice. We have experience setting up Offshore entities in various jurisdictions and have all of the necessary contacts and networking resources to quickly and effectively organize and put into operation the appropriate Offshore Business Entity. We understand both the legal and the tax consequences of owning and operating an Offshore Business and/or investments and you can take advantage of our experience and multitude of contacts with respect to the formation of your Offshore Entity.  Setting up an Offshore Business is an Asset Protection strategy that requires a combination of both, foreign and domestic structures. It’s wise to seek skilled legal advice from an Offshore Entity Formation Attorney who has proven expertise.  Contact our office today at 619.272.4235 to schedule a consultation today.

Levels of Asset Protection

  1. Level One involves basic Estate Planningfor the professional or business owner which includes Wills, Revocable Living Trusts, Durable Powers of Attorney, etc. This is a basic level that has to be addressed by everybody, but especially professionals, business owners and people of wealth.
  2. Level Two encompasses the operating business of the individual which is normally the primary source of his or her income and the operation in which the business owner or professional gives the majority of his or her time. In other words, the professional, the business owner and the real estate investor have to make sure that their business or professional practice and/or their real estate ownership is properly protected. This level needs to be closely examined by an experienced attorney who can help to evaluate the business structure and make sure that it is set up and implemented in the proper manner.
  3. Level Three involves taking advantage of any exemptions that are protected from creditor attack. This level includes homestead exemptions, insurance, annuities and retirement plans. It also encompasses marital planning which may involve the re-titling of assets into a structure of ownership of the non working spouse who is less likely to be at risk.
  4. Level Four involves liability protected entities for investment assets. In this regard, consideration should strongly be given to placing most, if not all, of your real estate and financial investments into liability protected entities such as LLCs.
  5. Level Five involves combining the utilization of liability protected entities such as LLCs with the utilization of Domestic Asset Protection Trusts. Eleven states have now adopted favorable legislation that provides asset protection and are the exceptions to the general rule that self settled trusts are not protected from creditor’s claims. This area is discussed in more detail on the “Domestic Asset Protection Planning“.
  6. Level six on the ladder involves much of the same strategy utilized in domestic planning, but instead of assets being located domestically, they are placed offshore for even greater protection. The benefits of going offshore are discussed on the “Foreign Asset Protection“.
  7. The final level on the ladder involves advanced estate planning Many of these techniques such as Charitable Remainder Trusts, Grantor Retained Annuity Trusts and Irrevocable Life Insurance Trusts are tied into estate tax savings and passing assets to future generations.

Protected Entities California

Corporations provide the necessary shield of liability for operating business assets and are the most common vehicles selected for business operations. The corporate form is a more traditional form of doing business and most business operations that have hard assets like equipment and produce products utilize the corporate form. When it comes to investment assets, however, the LLC is the entity of choice. If it is a pass through entity for tax purposes because it is either a disregarded entity, taxed like a proprietorship if it is a single member LLC, or a pass through entity taxed like a partnership if it is a multi-member LLC.

In talking about liability protection we have to differentiate between Inside Creditors and Outside Creditors. Basically, Inside Creditors are those creditors who have claims against the entity that contains the assets itself. Most business owners and professionals are not only concerned with protection from Inside Creditors, but are also worried about Outside Creditors who attempt to enforce claims against the business owner or professional personally. Many business owners and most professionals face the risk of having claims directed against them personally.

Example of an inside claim

If a business owner or professional has a rental property and places that property within an LLC, then if someone gets hurt at the rental property, the claim can only be directed against the LLC and the owner’s personal assets are, therefore, protected from such inside claims. In fact, inside debt protection in and of itself is of major importance, and should be addressed by placing all real estate assets except for your personal residence within an LLC.

Example of an outside claim

If there is a malpractice lawsuit against a doctor, attorney or business professional, then there is a claim against that individual personally. If the alleged victim gets a judgment then they will attempt to go against the assets in the LLC or LP. The claimant doesn’t go directly after the assets in the beginning.

CHARGING ORDER:

With respect to outside claims, it is important to understand the benefits of Charging Order protected entities such as LLCs and Limited Partnerships. If a creditor has a judgment against the owner/member of an LLC, the creditor’s remedy is to obtain a Charging Order against the debtor member’s interest in the LLC. A Charging Order is a like a garnishment of wages in that it attaches to the economic right of the debtor member to receive distributions from the LLC. Once the creditor has a Charging Order in place, then any distribution to the debtor member must be paid to the creditor. The benefit to the debtor member of the LLC is twofold:

  1. It limits the creditor from attacking the actual assets of the LLC.
  2. The creditor has to wait until distributions are actually made from the LLC.

In a properly drafted Operating Agreement of the LLC, the manager will have the complete discretion to withhold making distributions. Therefore, the creditor remedy of the Charging Order is effectively rendered toothless.

The problem is in many states the law or the courts allow the creditor much more leeway with respect to enforcing creditor’s remedies. Accordingly, it is important that the business owner or professional utilize an LLC from a state jurisdiction that has a more beneficial Charging Order law. Nevada, Wyoming and Arizona are such jurisdictions.

Foreign Offshore Asset Protection

A Foreign Offshore Asset Protection Trust is a trust that is set up in an offshore jurisdiction which has enabling trust legislation providing for substantial protection against creditors of the trustors. The biggest advantage of the Foreign Asset Protection Trust is the fact, that by its very nature, any legal attack against the assets in the Trust is transferred abroad to a different legal system.

The principal reason of going Offshore is to place the asset outside of the jurisdiction of the United States court system. With this in mind, there are two necessary considerations with regard to going Offshore for Asset Protection Planning purposes.

The first consideration is whether you have enough liquid assets to move Offshore for protection and essentially setting up a nest egg.  With a few exceptions, it does not make sense to go Offshore unless the individual involved has substantial liquid assets that can be placed Offshore because the U.S. Courts have jurisdiction over any assets within the US and can attack those assets.  Accordingly, Offshore Planning usually requires some substantial liquidity that can be invested Offshore.

The second consideration for going Offshore is whether an individual has international connections such as family offshore, owning property internationally or having an offshore business.  This is not a strict requirement, but does help to sustain the Offshore structure.

Offshore Bank Accounts

The set up and maintenance of Offshore bank accounts for US persons has become increasingly difficult because of the IRS’s aggressive position with respect to tax evasion and the US position relative to terrorism and money laundering. However, because of our international background and networking connections, we are in a position to assist our clients who legitimately want to set up Offshore bank accounts either as part of an Offshore investment or business or related to an Offshore Asset Protection structure. We have the wherewithal to expedite the process which usually involves the setting up of an Offshore LLC.  If the purpose is to have a considerable amount of liquid funds managed and invested Offshore, we are certainly able to accommodate the client with that objective. 

Offshore Corporations and Entity Formation Attorney

Setting up and operating an Offshore company should only be carried out after proper planning and tax and legal advice.  We understand both the legal and the tax consequences of owning and operating an Offshore Business and/or investments and you can take advantage of our experience with respect to the formation of your Offshore Entity.  Setting up an Offshore Business is an Asset Protection strategy that requires a combination of both, foreign and domestic structures.

Offshore Corporations

Bagula, Riviere, Coates and Associates, LLP is active in business formation, integration and leveraging offshore business entities with new or existing asset protection structures in all of the major offshore jurisdictions. Our firm can form Offshore International Business Companies (IBC’s), Foreign Asset Protection Trusts, and similarly specialized offshore components of Asset Protection Plans. Unlike an offshore service provider located in just one jurisdiction, the objectivity and security of US licensed attorneys gives the client the options and benefits of alternative jurisdiction analysis. In addition, we can provide valuable insight to optimize the US component of any prospective business or asset protection structure.

The following is from the article entitled “Asset Protection Planning”:

The proliferation of plaintiff lawsuits and the expanding concept of liability that has become second nature in our court system have engendered much concern and anxiety about the preservation of wealth in the United States. Many professionals like doctors and lawyers as well as business owners, corporate executives, real estate developers and investors, contractors and others operate in an environment of high risk. Many such people lack confidence that they will be treated fairly by the US legal system and are desirous of reducing their financial profile and eliminating their liability potential. For these individuals, the offshore planning alternative may very well be the best planning device available for maximum comfort and peace of mind.

Doing Business Offshore

Many business owners and investors either have opportunities or are interested in developing opportunities by doing business offshore. We understand the offshore business structure and we know how to set it up and properly maintain it. Doing business offshore can be complicated from a legal and tax standpoint, but it can be very profitable and practical to manage. We have offshore connections and through our networking contacts we can assist you in setting up and maintaining your offshore business structure.

Notable Cases

Negotiated an excellent severance plan for a high level executive without the need for litigation.

Notable Cases

Litigated on behalf of a vice-president of a major corporation a claim for wrongful termination. Ultimately negotiated a $300,000 settlement.

Notable Cases

Represented business owner (personally sued) and his business in suit for wrongful failure to promote based on alleged racial discrimination. Defeated the Plaintiff and gained a Judgment summarily without the need for trial. Argued and prevailed at appeal.

Judge Bob Coates and I have been comrads in the struggle with homelessness, for almost three decades, now, Father Joe Carrolland he has never given up! He is a very intelligent fighter…for the right. And a priest wouldn’t lie, would he?

Father Joe Carrol - Father Joe's Villages

Judge Robert Coates has been a friend and associate of the St. Stephen’s Cathedral Ministry Bishop McKinney for more than 40 years. As a law student, he was involved in the community in the interest of justice and equality. Mr. Coates and I led the effort to promote Racial Reconciliation in San Diego during the summer when other cities were responding with burning and violence. Prior to his appointment to the bench Mr. Coates served as the church attorney. He always conducted himself with professional excellence. Since his retirement from the bench he has made himself available to serve clients from this church and the community. I acknowledge that Robert Coates is an outstanding attorney and a decent human being.

Bishop George D. McKinney