Asset protection planning is usually triggered by fear of a catastrophic lawsuit.  Most of the clients I work for — especially physicians, closely held business owners and high net worth individuals — are concerned that a single lawsuit could wipe out everything they have.  And this concern is entirely justified.  It is silly not to protect your assets within the bounds of applicable laws.

But lawsuits are not the only reason for asset protection planning.  Totally unexpected catastrophes — anything from natural disasters, a stock market crash, or other economic crisis — can also suddenly expose many of your assets to creditors.  For example, a catastrophic loss of real estate or other property that is not covered by insurance could suddenly put all your other assets at risk.  Asset protection planning — done in advance of such a catastrophe — could insulate your other assets from the reach of creditors.

The recent events in Japan — an earthquake, followed by a tsunami, followed by nuclear power plant disasters, followed by all the economic fallout from these unanticipated disasters — remind us that everything can change in a moment.  You generally cannot lawfully transfer assets once disaster strikes.  Such a transfer would usually be a voidable fraudulent conveyance.

It is difficult to focus on disaster planning when no particular disaster is staring you in the face.  But that is exactly the right time for the most flexible and effective asset protection planning.