Asset protection has become necessary for just about every physician, every businessman, and every person with even reasonably substantial wealth. It has become customary to have some form of an asset protection trust.
As we see case law develop in the asset protection area, it seems that every time a new decision is issued there are numerous blogs and comments made about the case at conferences, whether positive or negative. The litigators generally claim that the new case spells the end of the technique that was used and failed to work in this particular case. They will often claim that a technique “doesn’t work” based on one bad case. The asset protection planners generally claim that “bad facts make bad law”. So who is right?
What is the goal when attempting to protect your assets? Isn’t the goal simply to structure your assets in such a way that they are less desirable to potential creditors? This is the philosophy behind asset protection. The asset protection structure should not be judged solely based on whether there is a similar structure that did not work when tested through the court system. Each situation stands on its own. No two fact patterns are exactly the same, no two parties to a lawsuit have exactly the same levels of fear and desire for compromise, and no two attorneys will approach the dispute in exactly the same way.
The goal isn’t necessarily to take a case through the court system and convince a judge to rule in your favor. The goal is to walk away with some or most of your assets intact. A settlement for substantially less than what could have been lost should be considered a victory. Unfortunately, case law generally glorifies the losing cases, not the winning cases, because the plaintiff tends to press the matter when the facts are more heavily on the plaintiff’s side. Therefore, we tend to see the bad results (from the debtor’s perspective) in the case law, but the good results (from the debtor’s perspective) go unreported because the dispute was settled. Those who practice in this area, however, have seen numerous clients settle matters, in large part because of the asset protection structure that was in place and therefore helped the creditor see the benefits in settling and the uphill battle that may exist if there is no settlement.
Playing the Game
Asset protection is a game of probabilities. Every legitimate wall that is placed around the assets should move the settlement number more in favor of the debtor. And every bad case that comes down the pike should move the settlement number more in favor of the creditor. Uncertainty over collectability causes most disputes to settle long before they get to that point. The creditor must assess the probability that he will be able to collect and the expenses that will be involved in trying to collect and then make a rational decision about how far to press the dispute and whether to attempt to settle and the likely settlement amount.
Asset protection planning is about putting the client in a strong negotiating position by using accepted, legitimate techniques so that the client will either settle the dispute for less than the amount that the client otherwise may have lost had the structure not been in place. It is not solely about case law. The asset protection scorecard not only includes case law, but also includes favorable settlements.
ABOUT THE AUTHOR
Steven J. Oshins, Esq., AEP (Distinguished) is a member of the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011. He was named one of the 24 “Elite Estate Planning Attorneys” and the “Top Estate Planning Attorney of 2018” by The Wealth Advisor. Steve was also named one of the Top 100 Attorneys in Worth and is listed in The Best Lawyers in America® which also named him Las Vegas Trusts and Estates Lawyer of the Year in 2012, 2015 and 2018 and Tax Law Lawyer of the Year in 2016 and 2020. He can be reached at 702-341-6000, ext. 2, at email@example.com or at his firm’s website, www.oshins.com.