We live in a litigious society. If you own a business, own rental
property or practice a profession, you have a one in three chance of
being sued this next year. Aside from real estate, large cash balances
in your bank account or a healthy investment portfolio will leave
predatory lawyers foaming at the mouth.
So how do you protect your cash, stocks and mutual funds?
As in any effective asset protection plans, privacy or more specifically, financial privacy is the key.
The
entire litigation process is predicated on the plaintiff's ability to
collect. It costs a great deal of money in attorney?s fees, court
costs, etc. to pursue a court case. If they don't think you have assets
to take, chances are they won't be interested in suing you in the first
place. In other words, do you own anything of value that would make it worth their time and effort to sue you?
Cash
in bank accounts, stocks or mutual funds in a brokerage account are
relatively easy to reach, giving the plaintiff's attorney the green
light to file their claim.
So how do you not own these assets but
still maintain control over them? The answer is by setting up a private
corporation to be the owner of the assets while you anonymously
maintain control of them. Of the many different legal entities
available, private corporations are ideally suited for this purpose.
Why corporations?
Under
the law, a corporation is an artificial "person", completely separate
from you. Because it is an independent entity, a corporation's
liabilities and taxes are separate from the people who own and operate
it. This is the reason why almost all successful people choose to
incorporate. It permits you to keep you and your liabilities separate
from your assets.
However, it is only in a state like Nevada or
an offshore jurisdiction such as the Bahamas that you can set up a
corporation so that, while you own and control your corporation, your
identity and ownership can remain completely private. Since the
ownership of the corporation cannot be traced to you, your enemies will
not be able to take your assets within your corporation.
Once a
private corporation is formed, a bank and/or brokerage account can be
established for the corporation and your cash and investment holdings
can then be transferred out of your name to the corporate account.
You
will still retain your personal checking account to pay for your
day-to-day activities but the bulk of your assets is now out of your
name and will not show up if an attorney conducts an asset search on
you. This strategy will not only lower your lawsuit worthy profile, it
will also dwarf any collection efforts if you lose a future lawsuit.
Carlos Lee, MBA, is the senior consultant for Asset Protection Consulting Group.
Visit Asset Protection Consulting Group to learn more about how to bulletproof your assets against future lawsuits.
