Many people question whether even the most complicated and sophisticated asset protection plan actually defeats creditor’s claims, especially where the asset protection plan is designed and implemented close to a judgment being entered or a lawsuit being filed. Evaluating the effectiveness of asset protection depends on having realistic goals and objectives. If by asset protection a person means becoming 100 percent judgment proof, then successful asset protection is difficult, especially if not done several years before problems arise. A highly motivated and well-funded creditor will eventually penetrate parts of any asset protection plan. If, however, one’s goal is to substantially improve their creditor protection and to place the majority of their assets beyond creditor attack, then asset protection success is obtainable if done early and with the help of an experienced asset protection lawyer.
Without asset protection planning, a client subject to a potential liability or an actual judgment will lose all assets not exempt by the law. With professional and advanced asset protection, collection of a judgment can be made difficult (though never impossible) and the debtor gains substantial leverage in negotiating a reasonable settlement of a creditor’s claim. Therefore, a reasonable goal of domestic or offshore asset protection should be to position yourself in a substantially improved bargaining position with future creditors.
Most important, asset protection does not involve hiding assets. Creditors will discover all your assets unless you lie under oath. Asset protection planning should assume that your creditors know about any interest you may have in all types of assets.
No one should expect that asset protection will reduce U.S. income tax liability. Do not make the mistake of equating offshore asset protection planning with offshore tax planning. Offshore asset protection with after-tax money is legal; offshore tax evasion is criminal.