To begin with the very basics, who is asset protection for, and why is it necessary? Business owners, real estate investors and physicians, amongst everyone else with wealth, are targets for those people looking for a payday by taking advantage of the inefficiencies and injustices commonly seen in our legal system. The US is an incredibly litigious society and, regardless of where you look for statistics, always seems to land in the top five most litigious countries. Because of this, and the amount of effort it takes to create wealth, it is only natural that people would look for ways to protect their wealth once they have it. The world is full of uncertainty and clients find comfort in knowing that the wealth they have worked hard to accumulate is protected if disaster strikes. Asset protection is the legal practice of using federal and state laws to clients’ advantage by structuring clients’ business and financial affairs in a way that protects them from losing their assets. This may include protecting assets from business disputes, contractual obligations, personal guarantees, automobile accidents, premise liability, malpractice, and all sorts of actions or omissions that clients (or their children) may make or fail to make. There are many strategies out there, each with individual pros and cons. The backbone of these strategies often includes using domestic and offshore trusts, limited liability companies (LLCs), and limited partnerships (LPs). How can an LLC or LP be used to protect one’s assets? If an LLC or LP is set up correctly (in the proper jurisdiction, with the proper management and equity structure, with formation documents with protective provisions) and certain 66 LAWYERMONTHLYMARCH 2023 Strategically Using Legal Entities to Protect Assets Thought Leader For those with substantial estates to protect, legal entities present a valuable method for safeguarding one’s assets. In this feature we hear more on the subject from Thomas VanNess III, who scrutinises the legal mechanisms by which LLCs and LPs can be used to protect a client’s assets by isolating them from creditors.
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