Orange County Business Journal

Disruptive Technologies in Estate Planning: Securing Assets from Lawsuit Predators

Jonathan and Stacy Riley lived, loved, and worked together for over 40 years. With the recent sale of their business, coupled with years of careful savings and dutiful investments, they have a healthy nest egg to take them through their golden years in comfort and ease. Armed with a bucket list full of exotic travel and exciting plans, their retirement kicks off with a six-month world Crystal Cruise. Life is good.

That’s why six months later the last thing they expected to receive was a threatening letter from a lawyer alleging his clients, the buyers of their business, had been defrauded and that without a substantial price reduction of the original sale price they would sue.

Even if they did nothing wrong what if the Rileys lost this surprise lawsuit?

They turned to their lawyer to determine their risks. Upon reviewing their estate and asset protection plans, he delivered the bad news. Like many traditional estate plans, the Rileys created a revocable living trust (RLT) to hold their assets, including the money from the sale of the business. While the RLT will avoid probate at their respective deaths it offers no protection from lawsuit creditors. Their assets sit perilously unprotected and they could lose a large portion of their carefully built nest egg. Their estate planning attorney never explained this. They were mortified!

Regrettably for the Rileys and for millions of other successful business owners, if the buyer of their business develops “buyer’s remorse,” any third-year law student could find ways to strike fear in their hearts. Panic over whether a judge or jury might side with the buyer by granting a large damage award sets in as fear about the future looms.

Luckily, there are newer disruptive technologies in the field of estate planning that deliver more robust asset protection options by “firewalling” assets for situations like this. Asset Protection Trusts discourage greedy plaintiffs from filing frivolous lawsuits aimed at bullying defendants into choosing between large legal fees to defend a lawsuit – coupled with potential financial ruin – or settlement.

For over thirty years, our firm has led the fusion of intelligent planning and asset protection. We make certain our clients pay the least amount of taxes legally allowed while maintaining a level of asset protection against financially ruinous lawsuits.  In today’s litigious environment asset protection planning is about protecting more than your legacy – it’s about protecting your lifestyle.

The goal of asset protection is to remove any economic incentive for new creditors to go after assets that are securely protected in a trust.  Protecting assets can include setting up trusts in states or nations whose laws make it difficult to violate those trusts.

Some people ask whether going offshore for foreign trusts is illegal.  After many years of experience creating these trusts my answer is that the IRS wouldn’t print all of the forms one is required to file if going offshore were a crime.

Luckily for the Rileys their lawsuit got dismissed before trial and boy were they relieved. We all love a happy ending. But don’t leave your future open to chance. Thoroughly review your estate plan to be certain it secures your assets from unexpected attacks lurking just around the corner.

Posted in Client Alert, Orange County Business Journal.