Orange County Business Journal

Protecting Your Blind Side

“White-eighty, white-eighty, hut!”

A crisp snap slams the ball firmly into Carolina Panther Cam Newton’s hands, and he drops back into the pocket, searching for his receiver as defensive line men bear down. He hears a loud crunch – the sound of two bodies colliding. Cam smiles knowing that his left tackle, Michael Oher, is protecting his blind side, giving him precious extra seconds. Cam cocks his arm, launching a bullet into the end zone. Touchdown!

Every great quarterback has a talented left tackle protecting their “blind side.” Who is protecting yours?

If you own a business, are married, or have an estate you care to pass onto your heirs – and you haven’t installed an asset protection plan – you are risking everything.

Take Samantha, for example. As the second generation of a successful family-owned business, she looks forward to a comfortable retirement. But last year, her company manufactured a defective product that could be the direct cause of dozens of fatalities. Between lawsuits and a massive product recall her suddenly once-thriving business quickly becomes bankrupt leaving Samantha on the verge of retirement with nothing to her name. If she had been aware of just a few of the many ways to protect some of her assets her personal financial situation would not have been so dire.

She is not alone. Many hard working Americans find out far too late that financial ruin could have been avoided had their trusted advisors so informed them.

Like the left tackle on an NFL team, an asset protection lawyer’s job is to protect you from what you can’t see coming – to protect your blind side.

Lawyers ask a lot of “what ifs.” In Samantha’s case a lawyer might have warned her ahead of time that insurance can be woefully insufficient in product liability cases and that other forms of advanced planning can lawfully keep judgment creditors from reaching your hard-earned assets during such financial and legal disasters. Moreover, a skilled asset protection lawyer would have evaluated her risks and recommended legal, effective, and proven asset protection vehicles designed to reach an early and modest financial settlement.

What are some of these planning vehicles?

California businesses and their owners can take advantage of one of the most protective structures, the Private Retirement Trust™ (PRT). The PRT fully exempts assets contributed to it from future creditors[1] as well as subsequent distributions from the PRT paid to the participant at retirement, whether from lawsuits or bankruptcy. When properly administered, Samantha’s assets would have been protected before her business imploded.

Another proven “firewall” is the foreign asset protection trust (FAPT) which would hold her cash, other liquid assets, and personal investments. Timely established, the FAPT is formed under the more protective laws in well-established foreign countries that do not recognize U.S. judgments to be satisfied against the assets of the FAPT, even if Samantha is one of the FAPT’s beneficiaries.

For those who are not comfortable taking their assets offshore the HYCET Trust, an irrevocable dynasty trust established in Nevada, provides superb protection against most types of future lawsuit creditors. The HYCET Trust allows you to create an irrevocable trust for your heirs. But if you later need or want all or part of the assets you transferred to the trust your trustee may add you as a beneficiary and therefore you can access the trust’s assets. You can really “Have Your Cake and Eat it Too” by reclaiming gifted assets, again, sanctioned by the IRS (See PLR200944002).

These are just three examples of the many different methods that skilled asset protection lawyers use to protect their most valuable players (their clients) against unforeseen lawsuits, creditors, estate tax burdens in estate planning, and the risks of exposing separate property in a contentious divorce. They are vehicles that would have saved Samantha from having to start all over again.

Like a good left tackle, an asset protection lawyer always protects your blind side. If yours is exposed, we can help.

[1] The PRT exempts certain exception creditors from protection such as alimony and child support obligations.

Posted in Client Alert, Orange County Business Journal.