By: M. Wayne Patton
Many companies and individuals offering asset protection provide misleading (if not really detrimental) advice in an effort to line their own pockets. Unscrupulous promoters and marketers will often tout the universal benefits of foreign asset protection trusts (“offshore trusts”), Nevada corporations, land trusts, complex corporate structures, and mechanisms that “make assets disappear” or at least make them very difficult to find. The truth is that each individual client in need of asset protection services is just that: An individual, and each situation is unique.
The Sale of Asset Protection Services
Reputable asset protection attorneys customize tools and services to the needs of the client. There is no universally “right” answer or plan that fits every situation. It is simply unethical and morally wrong to represent that any asset protection “package” meets the needs of every potential client. In my opinion, it constitutes malpractice. If you are considering a prepackaged asset protection plan sold through a seminar or website, then we strongly encourage you to at least obtain a second opinion on the appropriateness of such plan from a reputable practitioner of asset protection law.
Ethical Considerations From the Client Perspective
Aside from ethical and malpractice issues concerning the marketing and promotion of asset protection and offshore trusts, there is one prevalent question that you must answer before engaging an asset protection lawyer: “Is asset protection right for me from an ethical standpoint?” Here are a few of the ethical rules that we operate under:
- Asset Protection is separate and apart from taxation planning, except in the context of estate planning. In order for an asset protection plan to actually work–for it to protect your assets–it cannot be used a mechanism to avoid income taxes.
- Asset protection is not about lying or hiding assets. Under no circumstances should an asset protection plan require you to lie, “lay low,” or otherwise do anything except be completely honest about your plan. That’s true whether you’re under oath or simply filling out a loan application.
- Asset protection is not a license to act recklessly or illegally. We require our clients to maintain a high standard of responsible personal and business practices. We always recommend that professionals carry liability insurance sufficient to cover accidents that may occur when such policies are reasonably available. Good asset protection planning is never an excuse to disregard the welfare of other people or their property.
- Asset protection is about carefully following the rules of the game and staying within the strictures of the law. Some plaintiff’s attorneys will take full advantage of any chance they get to deprive wealthy individuals of their assets, but in order to be successful, they must operate within the confines of the law. Asset protection is the other side of the coin. It’s your opportunity to take full advantage of the legal system before trouble crops up.
In short, asset protection lawyers should strive to allow clients to determine the extent of their legal exposure to losses. Risk assessment and due diligence is part of every transaction. From a business perspective, full disclosure of the existence of corporate entities and trusts is highly recommended. Once disclosure is made, it’s up to the other party to conduct their diligence and determine if they want to undertake the risk and transact business. Nothing is hidden from sight. In terms of professional liability, again we stress the importance of insurance policies intended to compensate injured parties for actual damages, but in all circumstances you should look for opportunities to limit and predefine the limit of such liability in order to deter plaintiff’s attorneys from targeting you. By adhering to high personal standards and acting responsibly, it should be clear that you can ethically take full advantage of the services offered by legitimate asset protection lawyers.