What is Asset Protection Planning?

Posted on February 23, 2010 by Ken Laino

There is an increasing interest in asset protection among both individuals and businesses.   But many people are still not exactly sure what "asset protection planning" is.

Asset protection planning is simply the process of lawfully protecting your personal and/or business assets from creditors.  It involves taking advantage of laws and legal doctrines that were actually designed to help you protect your assets.

"Asset protection" sometimes has a bad connotation due in part to illegal offshore tax haven schemes and other questionable planning techniques.  Many asset protection strategies, however, are ethical and highly advisable.  An analogy can be drawn to tax planning.  Some schemes that are called "tax planning" are nothing more than illegal and fraudulent evasions of taxes.  Legitimate tax planning, however, is essential for both businesses and individuals.  Similarly, legitimate asset protection planning is important for businesses and individuals, especially in our litigious society.

Asset protection planning makes use of laws that were designed to enable organizations and individuals to protect their assets.  There are numerous asset protection alternatives for individuals, including maximizing contributions to IRA's and qualified retirement plans; using various forms of trusts (including domestic asset protection trusts, irrevocable life insurance trusts, dynasty trusts, and qualified personal residence trusts); retitling various assets; utilizing limited liability companies to protect real estate and other investments; and using life insurance in certain instances.  There are also a variety of strategies for lawfully protecting assets of your business, including using separate entities for certain business functions; using limited liability companies; using insurance as protection; and various other strategies.  There are many alternatives that are perfectly lawful and appropriate.  Fraudulent conveyance statutes and other laws are designed to prevent abuses, but there are a wide variety of asset protection strategies that can generally be employed to protect your personal and/or business assets.  For a more in-depth discussion of asset protection strategies that might be appropriate for you or your business, you can refer to an article I wrote recently that outlines some of the options.

Current economic conditions, recent high profile business failures, the recent waive of foreclosures, rising bankruptcy filings, and the seemingly endless number of lawsuits filed in the United States each year all illustrate the need for reasonable asset protection strategies.  In this environment, businesses and individuals should have no hesitation whatsoever in taking steps to lawfully protect their assets.

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Business Succession Planning

Posted on February 23, 2010 by Ken Laino

A business succession plan is a key component of any asset protection plan.  In most cases, a family business constitutes a large percentage of the owners' assets.  Yet a significant number of businesses have absolutely no succession plan in place.

In thirty years of representing family businesses, I have come to understand why succession planning is so difficult.  There are many reasons for this but I believe three of the most significant are as follows:

  1. It is simply difficult for many business owners to imagine that anyone else (including family members) will run their business as well as they do.  And they are frequently correct about this!  Unfortunately, this is not a good reason for having no succession plan in place.  It reminds me of naming guardians for minor children in a Will.  Most parents feel that no one would raise their children with the same care and attention that they would; and that is probably correct.  It is nevertheless foolish to simply ignore what would happen if both parents died.  The same is true in business.  Lack of a succession plan can lead to confusion and needless controversy following the death, disabilty or retirement of the owner.
  2. Many business owners have thought of succession planning, but simply do not know where to start.  All that is really required to get started is to contact a professional...either an attorney or business consultant who specializes in this kind of planning.  Business succession planning should be a team effort involving a number of professionals.  But someone needs to spearhead the effort, and this is frequently the job of an attorney or consultant.
  3. Finally, I find that in today's lightning-paced business environment, it is simply hard for business owners to find the time for succession planning.  Business owners should realize that developing a succession plan can save huge amounts of time and money in the future.  Speaking in business terms, there is generally a huge return on investment.  This alone should be an incentive to do some planning.

Business owners today are rightfully concerned about catastrophic lawsuits and other creditor problems.  I would guess, however, that more businesses are lost or severely damaged by the lack of a meaningful succession plan than by an unexpected, catastrophic lawsuit.  Asset protection in today's business environment is abouletly critical.  And a business succession plan is a key component of asset protection.

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