Asset Protection Law Journal : Asset Protection Lawyer & Attorney : Kenneth J. Laino : Schneider Smeltz Ranney & LaFond Law Firm : Trusts, Estate Planning

Certain life insurance products (as well as certain arrangements like an irrevocable life insurance trust) can provide asset protection advantages.  For example, if you have a significant amount of cash that is not otherwise needed, and you also have the need for life insurance, a single premium whole life policy might be appropriate.  Cash that is simply sitting in a bank or money market account is not well protected from creditors.  A life insurance policy is going to have far greater protection.

I am certainly not recommending the purchase of any life insurance products without careful thought.  But life insurance can play a meaningful role in estate planning and asset protection planning.

In many jurisdictions (including Ohio), the cash value of life insurance is generally well protected from creditors.  The protection is not as high as that offered by a qualified retirement plan; but it is still very good.  And it is vastly better than assets held in a personal bank or brokerage account.

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A July 31, 2011 article in The Sacramento Bee had a good summary of what a debt collector can and cannot do.  The article was written by Claudia Buck (McClatchy Newspapers).  It included excerpts from an interview with Robert Tavelli, former president of a private California debt collection firm.

Debt collectors are subject to a number of legal restrictions.  For example a debt collector cannot contact you before 8:00 a.m. or after 9:00 p.m.; and cannot contact you at work once they have been told you cannot take calls there.

This article caught my attention because it mentioned that debt collectors will generally not pursue individuals who look like they are financially unable to pay the debt.  This of course makes perfect sense -- a debt collector would gain nothing by pursuing someone who appeared to be uncollectable.

This same concept applies in general to asset protection planning.  A creditor is going to be far more likely to aggressively pursue you if it appears all of your assets can be seized with relative ease.  The harder it looks to collect from you, the more likely a creditor will settle for a lesser amount. So taking appropriate steps to lawfully protect your assets before you have any creditor problems is highly advisable.

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The statute of limitations relating to a fraudulent transfer can vary significantly from jurisdiction to jurisdiction.  In Ohio, Section 1336.09 of the Ohio Uniform Fraudulent Transfer Act provides that a claim for relief must generally be brought within four years after a transfer was made.  But even if that period has expired, a claim may be brought within one year after the transfer was (or reasonably could have been) discovered by a claimant.

Some other states and certain foreign jurisdictions (such as the Cook Islands) have much shorter statutes of limitation.  This is one of the considerations involved in choosing a jurisdiction for a domestic asset protection trust or an offshore trust.

Many jurisdictions (including Ohio) consider when a claimant reasonably could have known about a transfer.  For this reason, it is sometimes advisable to provide some sort of public notice of a transfer of assets.  Many clients mistakenly think that asset protection involves hiding assets.  That is not the case.  It is not always advisable to provide public notice of an asset transfer, but sometimes it is.  This can be done in a number of ways, such as filing a deed, a UCC financing statement, or some other public notice that a transfer of assets has occured.

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The Court of Chancery in Delaware is well respected by business lawyers from coast to coast.  A recent New York Times article (which I discussed in another recent post) explains that the Delaware Chancery Court has a reputation for quick and knowledgeable business decisions.  This is one of several reasons that so many businesses are incorporated in Delaware.

Leo E. Strine, Jr. was recently confirmed as the new Chancellor of the Delaware Court.  Chancellor Strine is a graduate of a top national law school (University of Pennsylvania) and worked for Skadden Arps in New York City (one of the most recognized corporate law firms in the United States).  The new Chancellor previously served as Vice Chancellor of the Court, and has already written hundreds of business decisions.  While there are many competent judges in other states, the Delaware Chancery Court has very specific expertise in business law.  And it has a long tradition of excellence.  Chancellor Strine is the 21st Chancellor of the Delaware Court since 1792.

There are a variety of reasons that many businesses are formed in Delaware.  The long and very stable history of the Delaware Chancery Court, and the excellent qualifications of its judges, are among the many reasons that Delaware is often a good choice when forming a new business.

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Approximately 900,000 businesses are incorporated in Delaware, including 63% of all fortune 500 companies.  This is according to Rita K. Farrell in a recent New York Times article.

In various other posts, I have explained how Delaware's LLC statute provides better asset protection for LLC owners than the law in many other states.  The Delaware law for corporations is also advantageous (particularly for larger corporations).  This is in part because the law in Delaware is generally favorable to businesses; it tends to be stable; and it is predictable.  According to the New York Times, 21% of Delaware's revenues come from franchise taxes!  Many businesses have obviously decided to be formed in Delaware; and Delaware obviously has an incentive to continue that trend.

Various other states are also very viable alternatives for forming a corporation or a limited liability company.  I am still forming a number of Ohio corporations under certain circumstances.  Each situation must be analyzed on its own.  But as noted in the New York Times article referenced above, Delaware is obviously a very popular choice for incorporating a new business.  It is also becoming a very popular choice for forming a limited liability company.

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