Asset protection strategies for people with less than a million?

[FREE CITIZEN]

I was having this discussion with a friend, I was explaining to him, how the gold standard of asset protection was some form of an offshore LLC with a trust (I used Nevis and the Cook Islands as an example). He remarked that is awesome, but what is the cost? I replied, it is recommended that someone have 1 million USD, to make the cost worth it. It said, oh well, I am not there yet.

My friend who does renovations is always worrying about someone suing him (and has friends that have been sued, by customers that have unrealistic or looking to shake contractors down.

So my question is, what options are out there for asset protection for people in the well off but not rich group? How could they best protect themselves, from lawsuits that could damage their future. How does someone protect say their home and perhaps savings of half a million that offers some protection but doesn't cost as much as a trust in say the Cook Islands?

Alternatives?

 

[Sols]

Asset protection isn't an off the shelf solution that has a certain price tag. It's tailored based on the risks and on the assets. It's also highly dependent on where the assets and/or its owners and/or beneficiaries are located. Your friend can place his wealth in a foreign company (trust or foundation) in a place like Nevis or Cook Islands. That in and of itself isn't a huge cost. Low five figures. If assets and there long enough to satisfy for example fraudulent conveyance regulations, then it's very hard for someone to sue your friend personally.

However, let's say the risk is frivolous law suits (creditor risk) against a business (the asset). The easiest way to protect assets is to conduct business through an entity that offers limitation of liability, have all necessary insurances, registrations, certifications, and licensed, and to operate said business in a legal manner. Do all that and it becomes very difficult to successfully sue the business, let alone sue the business owner.

Renovations are a physical service. Offshore won't really protect you from a bad renovation where the client slips and breaks a hip on stairs that weren't nailed down properly. That's what insurance is for.

Asset protection doesn't mean you won't get used. If the counterparty decides to sue, they will sue, and your friend will have to defend. But if he loses, there won't be much to take as the majority of his funds will be inaccessible.

Check with a local lawyer, though. Make sure your asset protection structure isn't considered fraudulent. Understand what the consequences are of your friend's actions in case of a law suit and in case he loses such a lawsuit.

 

[CyprusLawyer101]

In your friends' case he should run his business through a limited liability company. Essentially this restricts any claim to be brought only against the company and its assets. Historically this was the primary reason for the creation of the limited liability company.

 

[JohnLocke]

Indeed a good suggestion from @CyprusLawyer101

Furthermore personally I would get my assets protected in an foreign country not locally, I know it is not protecting you itself, but it makes it very difficult for creditors and lenders to come after them. Doing it right you have options to make it very complicated for someone to come after your assets.

And finally, if you can read between the lines at the below article it is worth a read.

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[wellington]

In your friends' case he should run his business through a limited liability company. Essentially this restricts any claim to be brought only against the company and its assets. Historically this was the primary reason for the creation of the limited liability company.

True and if the company is sued there’s still a disgorgement etc in the courts.

So basically as a physical company there’s little that can be done apart from a new LTD for each project

 

[FREE CITIZEN]

Sorry I was away for Mother's Day weekend.... Thank you for the replies, I will pass this along to my friend.

So this had me thinking, how would this situation and methods change if we are now talking about just a person being sued? (no corporation or business involved)

Say one were to get into a car accident and their insurance was not adequate to cover the judgment against them. What methods could be employed to shield one's assets from being seized? Once again, we are talking about a person that does not reach the threshold of a million in assets that would make a trust ongoing costs worthwhile. What entities or methods could a middle class person employ to try to avoid financial ruin?

 

[JohnLocke]

In that case, it might be a bit difficult. The cheapest and easiest option is to move to a country like Dubai or similar. It also depends on where the person currently lives in order to suggest alternatives.

 

[Sols]

Say one were to get into a car accident and their insurance was not adequate to cover the judgment against them. What methods could be employed to shield one's assets from being seized? Once again, we are talking about a person that does not reach the threshold of a million in assets that would make a trust ongoing costs worthwhile. What entities or methods could a middle class person employ to try to avoid financial ruin?

In this example, you can keep the assets safe by having them in some foreign structure that a local court can't lay their hands on.

However, if you're found responsible for the damage, a court might just garnish your wages instead until you have repaid the debt. In this case, let's assume the asset protection structure is set up properly. The funds held in the structure are probably not accessible day-to-day for the person. Inability to exercise control over the funds (or assets) is an important aspect in a proper asset protection structure, as otherwise the court would just tell you to withdraw money from the trust or whatever it is.

So yes, your friend can for example put their 500,000 USD wealth in a Cook Islands trust with a trustee based in Nevis and bank account in Singapore or Cook Islands. They won't be able to access that money easily, but at least they can start saving time on their morning commute by driving on the sidewalk. And when a court tries to compel your friend to pay, he can simply throw his hands up and say he's broke. "Fine," the court says, and garnishes your friend's wages for the next 15 years instead. If your friend can't meet the payment requirements, it's prison time.

But the assets will be protected.

Go speak with asset protection specialists like Sovereign Group, Southpac Trust, Asiaciti, and so on. Discuss what they propose with a local lawyer, to make sure that the structure doesn't violate local law. A structure might be involve Samoa, Hong Kong, and Mauritius and be completely legal there, but illegal where you live.