Real Estate Developers Synopsis: Discusses the need of real estate developers for asset protection planning, and possible solutions.
Corporate Directors Synopsis: Discusses the need of corporate directors and officers for asset protection planning, and possible solutions.
Business Owners Synopsis: Discusses the need of typical business owners for asset protection planning, and possible solutions.
Physicians Synopsis: Discusses that physicians are typically targets of promoters of sham asset protection schemes, the need of physicians for asset protection planning, and possible solutions.
Holistic Planning Synopsis: Discusses the need for all financial, tax, succession, and asset protection planning that is done for a client to be tightly integrated and mutually supportive.
Remediation and the Planning Process Synopsis: Discusses our process for fixing defective asset protection structures and for creating new plans on a go-forward basis.
Some Final Words Synopsis: A short summary of our main concepts, and references to our primary supportive websites.
Corporate Strategies Synopsis: Describes various complex corporate strategies that may be of use in certain debtor-creditor situations.
Definition: Recapitalization Strategy -- A method of increasing the capital base of an entity under creditor attack by contributing a valuable but illiquid asset to the entity.
Definition: Dilution Strategy -- A method of decreasing a creditor's share or interest in an entity by issuing additional shares or interests to non-creditor shareholders or members.
Definition: Migration Strategy -- A method of transferring assets by repeated sales of the assets to third-parties before a final sale to the target purchaser.
Redemption Synopsis: Describes the basics of the Redemption Strategy.
Definition: Redemption Strategy -- A method of containing liabilities by an intermediate sale to a party in a debtor-haven.
Definition: Devaluation Strategy -- A method of setting a low value for an asset by repeated sales to third-parties at successively lower prices, and which may include dissembling an asset with the idea of later reassembling it with the target purchaser.
Backwardization Synopsis: Describes the basics of the Backwardization Strategy.
Definition: Backwardization Strategy -- A method for creating an apparent high sale value to defeat fraudulent transfer purposes, with a later reduction in price when the limitations period has passed.
Structured Financial Products Synopsis: Describes potential uses of Structured Financial Products in the debtor-creditor context.
Definition: Structured Financial Product -- A financial product created to serve a transaction-specific purpose.
Definition: Replication Strategy -- A complicated strategy for transferring wealth involving mirrored option arrangements and controlled counterparties, and based on particular future assumptions of market volatility.
Definition: Zero-Coupon Bond -- Typically, a bond that has been stripped of its interest coupons so that only a single lump-sum payment is made at maturity.
Introduction Definition: Captive Insurance Company ("Captive") -- Slang for an insurance company used predominantly to underwrite the business risk of other subsidiaries of the parent company or owner. The term "captive" is not used in any insurance statutes or in the Internal Revenue Code, but is rather a practice term used to describe an insurance company fulfilling the described role.
Insurance Company Economics Synopsis: Discusses why insurance companies are created, and the basics of captive insurance companies.
Captives and Risk Management Synopsis: Discusses captives as tools for managing various identifiable risks of the owner's business, and to take advantage of pricing inefficiencies in commercially-available insurance.
Definition: Closely Held Insurance Company (CHIC) -- A privately-held insurance company that is typically owned either by the owner's children or an irrevocable trust formed for the owner's children, to provide additional tax and succession benefits in addition to those of the captive arrangement.
Definition: Offshore Private Placement Variable Universal Life Insurance (OPPVULI or more commonly "Offshore PPLI") -- A variable universal life insurance policy that is offered by a foreign insurance company on an private placement basis, and which is highly customized for the specific needs of the policyholder.
Installment Sales and Annuities Synopsis: Discusses the asset protection advantages of installment sales and annuities under certain state's statutory creditor exemptions, and the difficulties of creditors in garnishing the sale proceeds in other states.
Definition: Self-Canceling Installment Note (SCIN) -- A method of selling an asset where the buyer provides a promissory note to the seller with a fixed payment period, but which note and obligation to pay the seller is canceled if the seller dies.
Private Annuity Synopsis: Describes private annuities, their operation, their tax treatment, and their asset protection benefits.
Definition: Private Annuity -- A method of selling an asset whereby the seller (obligee) sells the asset to the buyer (obligor) in exchange for the buyer agreeing to make certain payments to the seller until the seller dies. To qualify as a Private Annuity for U.S. tax purposes, in addition to other requirements, the buyer (obligor) must not be in the business of issuing annuities.
Definition: Offshore Private Placement Deferred Variable Annuity (OPPDVA or more commonly "Swiss Annuity") -- A variable annuity with annuity payments initially deferred that is offered by a foreign insurance company on a private placement basis, and which are typically customized to the specific needs of the policyholder.
Chapter 22: Management Companies, Leasing Companies and ESOPs
Management Company Structures Synopsis: Discusses the use of Management Company structures to absorb corporate liability and provide control functions.
Definition: Management Company -- A company formed primarily to act as a manager of another entity, distance control of the other entity from the owners, and absorb liabilities arising from the management function.
Offshore Management Companies Synopsis: Discusses the uses of Management Companies formed in debtor haven jurisdictions.
Definition: Offshore Management Company -- A company formed in a foreign debtor having jurisdiction primarily to act as a manager of another entity, distance control of the other entity from the owners, and absorb liabilities arising from the management function.
Leasing Companies Synopsis: Discusses the uses of Leasing Companies for risk management.
Definition: Leasing Company -- A company used to hire employees and lend those to the underlying business, to reduce profits in a liability-producing company or to shift employment liabilities away from a valuable business.
ESOPs Synopsis: Discusses the use of ESOPs to further encapsulate liability in the underlying entity.
Definition: Employee Stock Ownership Plan (ESOP) -- A plan formed to benefit and incentivize the employees of a business, and which can qualify for advantageous tax treatment.
Synopsis: Discusses the use of non-traditional entities as it relates to debtor-creditor planning.
Definition: Hybrid Entity -- An entity that does not have a classic form, such as a corporation or partnership, but instead exists as a combination of entities, such as a combination of trust and corporation. Even as late as the early 1990s the LLC was considered to be a hybrid of a corporation and a partnership, for example, but it has since become a classic form of business entity.
Synopsis: Discusses the predominant offshore jurisdictions that have limited liability company statutes.
Definition: Offshore Limited Liability Company (OLLC) -- A limited liability company formed pursuant to the laws of a foreign debtor haven jurisdiction, such as the Nevis LLC.
Synopsis: Discusses probably hurdles that creditors would face in attacking OLLC structures, and the use of OLLCs in conjunction with foreign trusts and domestic ocmpanies.
Synopsis: Discusses the basics and operations of a United Kingdom Limited Liability Partnership, and its potential asset protection advantages from the U.S. viewpoint.
Definition: U.K. Limited Partnership (UKLP) -- A limited partnership formed under the United Kingdom's Partnership Act of 1907.
Definition: U.K. Limited Liability Partnership (UKLLP) -- A limited liability partnership formed under the United Kingdom's Limited Liability Partnership Act of 2000.
Definition: Charging Order -- An order issued by a court to a judgment creditor which essentially compels an entity of which the debtor is a partner or member to direct to the creditor until the judgment is satisfied any distributions that would otherwise have been made to the debtor.
Foreclosure Synopsis: Discusses the possibility and ramifications of a creditor successfully persuading a court to convert the charging order into a foreclosure of the interest, so that the creditor has fully the partnership or membership rights of the debtor.
The Delaware Series LLC Synopsis: Discusses the basics and operations of the Delaware Series LLC.
Definition: Series LLC (a/k/a "Cell LLC") -- A form of LLC allowed by the statutes of only a few jurisdictions (most popularly Delaware) that allow membership interests to be divided into categories or "cells" with liability for particular actions of the LLC theoretically limited to the capital contributed to the particular series in which the operations of the LLC occurred.
Definition: Charging order protected entities (COPEs) -- Entities that restrict the remedies of a creditor of an owner to a "charging order" that entitles the creditor to distributions made in respect of that ownership interest, but do not allow -- at least initially -- the creditor to actually take the ownership interest. From an asset protection standpoint, the advantage is obvious: The creditor has no immediate means of getting at the assets in the entity even though the creditor holds a judgment against one of the owners.
Extensive information relating to charging orders, including excerpts from the uniform partnership and LLC acts, and a collection of opinions concerning charging order protection, is collected at http://www.assetprotectionbook.com/charging_orders_intro.htm
Synopsis: Discusses the basics of general partnerships and limited partnerships, and their U.S. tax treatment.
Definition: Partnership -- A partnership is an association of two or more persons carrying on a business venture as co-owners for profit. Partnerships come in two basic varieties: general and limited.
Definition: General Partnership (GP) -- A partnership that consist only of general partners, all of who are jointly liable for the liabilities of the partnership, and all of whom have management rights to the partnership. In asset protection planning, general partnerships are usually to be avoided.
Definition: Limited Partnership (LP) -- A partnership that consist of general partners who are jointly liable for the liabilities of the partnership and who have management rights to the partnership, and limited partners whose liability is limited to their contributions to the partnership and who have no management rights, i.e., general partners are true partners and limited partners are mere passive investors.
Synopsis: Discusses the basic elements and operations of limited liability companies.
Definition: Limited Liability Company (LLC) -- A hybrid type of legal entity that combines certain traits of corporations with certain other traits of partnerships and other noncorporate legal entities. LLCs allow their owners (called members) to have the best of all worlds: pass-through tax treatment like a partnership, limited liability like a corporation, unheralded flexibility in ownership and management structure, and charging order protection.
Definition: Member-Managed LLC (MgrLLC) -- An LLC that allows the members to have management rights, very similar in operation to a general partnership, but with some degree of limited liability for the members.
Definition: Manager-Managed LLC (MemLLC) -- An LLC that provides for one or more designated managers to have management rights, and with the members having no management rights. With a Member Managed LLC, the members are in a role very similar to limited partners.
Definition: Single-Member LLC (SMLLC) -- An LLC with but one member, who is typically also the manager, formed in a jurisdiction that allows a single member. Because they are relatively untested, the liability protections of SMLLCs are mostly theoretical, but should be similar to that of a sole-shareholder corporation.
Synopsis: Discussion of the history of the LLC in Europe and Latin America, the adoption by Wyoming of the first LLC statute, and the Check-the-Box Regulations.
Definition: Check-the-Box Regulations -- Regulations promulgated by the Secretary of the Treasury in 1996 which allow an LLC simply to choose whether to be taxed as a partnership or a corporation.
Synopsis: Discussion of the tax treatment of LLCs as corporations, partnerships, or disregarded entities.
Definition: Disregarded Entity -- An entity for which the tax consequences are attributed to its owner as if it did not exist. Note that this does not mean that the entity is "tax exempt", which is a common and false claim made by tax scam artists.
Synopsis: Discusses the uses of LLC for estate planning, and their similarities for federal gift and estate tax planning purposes to limited partnerships.
Synopsis: Discusses the basic elements and operation of International Business Companies.
Definition: International Business Company -- A corporation authorized by the statutes of a debtor haven which (with the exception of banking, of course) can only conduct business with persons or entities outside the debtor haven, and not with the locals. In other words, it is a company incorporated in a debtor haven but required to be used elsewhere.
Definition: Nominees, Nominee Shareholders, Nominee Directors, Nominee Officers -- These are persons who act on behalf of the true shareholders, directors, or officers of the company, and who typically have executed an undated resignation which allows their replacement at any time.
Synopsis: Discusses the use and severe tax disadvantages of bearer share structures.
Definition: Bearer Shares -- Shares which are owned by and give all their rights to the holder (the "bearer"), which ownership is not recorded on the company's books. Because of their primary uses for money laundering and tax evasion, nearly all jurisdictions have abolished bearer shares in favor of registered shares, the ownership of which are recorded on the company's books so that physical issuance of the shares is in many ways superfluous.
Additional information on Bearer Shares is available at http://www.quatloos.com/bearer_shares.htm and is a "must read" for anybody contemplating the use of bearer share structures.
Synopsis: Describes several forms of alternative share ownership, such as companies limited by guarantee and hybrid companies.
Definition: Companies Limited by Guarantee -- A company that has not been capitalized by cash, but rather by the promises of the shareholders to provide a specified amount of cash if required by the company to satisfy liabilities. A similar example is the traditional Lloyds of London syndicates were essentially companies that were capitalized by the unlimited guarantees of their members (the "Names") to stand behind the syndicates' underwritings.
Synopsis: Gives an overview of U.S. federal tax treatment of foreign companies owned or control by U.S. persons.
Definition: Controlled Foreign Corporation (CFC) -- In very general terms, the U.S. Internal Revenue Code term used to describe a foreign corporation that is owned in substantial part or controlled by U.S. persons. For example, an International Business Company formed in the Cayman Islands and owned and controlled in majority party by three U.S. shareholders would likely be treated as a CFC. A CFC has very extensive reporting requirements, and the failure to disclose the existence, operation or revenues of a CFC may be a felony in some instances.
Definition: Registered Agent -- An agent for the corporation who is domiciled in the state of incorporation and is available to receive service-of-process on behalf of the corporation.
Definition: Bankruptcy Remote Entity (BRE) -- A business entity structured so that in the event of a bankruptcy the liabilities created by the entity do not pass to any other entities or assets of the owner.
Choosing the State or Incorporation Synopsis: Discusses the relative importance of choosing the state of incorporation, and the concerns where the corporation will hold real state in another state.
Rights of Creditors Synopsis: Discusses forum-shopping strategies by creditors to get around the corporate protections.
Definition: Professional Corporation (PC) -- A form of corporation that can have only certain licensed professionals as shareholders, and which typically does not protect the professional shareholder from lawsuits brought alleging their professional negligence.
Registration of Foreign Corporation Synopsis: Discusses the necessity of registering a corporation in a particular state when it has been incorporated elsewhere.
Nevada Corporations Synopsis: Discusses Nevada corporations, and how Nevada corporations are shamelessly marketed by promoters as being much more effective than they really are.
Definition: Nevada Corporation -- A corporation formed in Nevada pursuant to Nevada's corporation act, which provides debtors some advantages not typically found in the corporation laws of other states. Unfortunately, the advantages are usually grossly overstated by promoters who arrange structured based on Nevada corporations that have very serious flaws from the asset protection perspective. Nevada corporations are usually the primary part of the "Asset Protection Consultants" scam that is run from Nevada.
Definition: Corporation -- A fictitious legal entity authorized by statute, created by the filing of Articles of Incorporation with the relevant jurisdiction, and capitalized by issuing shares of stock. A corporation can provide protection to the shareholders against the liabilities created by the corporation in excess of the corporation's capital.
Definition: Poison Pill -- A defensive arrangement whereby if a hostile party attempts to seize control of the corporation by accumulating stock, additional stock is issued so that all shares are diluted, thus increasing the costs of the hostile party's acquisition.
Definition: Golden Parachute -- A defensive arrangement whereby if a hostile party attempts to seize control of the corporation by changing the corporation's officers, the officers are given large severance benefits, thus increasing the costs to the hostile party.
Synopsis: Discusses minimal requirements for treating a corporation as a separate entity so that a court would respect it as such.
Definition: Corporate Shell (a/k/a Corporate Veil) -- Slang for the liability limiting advantage of a corporation, which limits the liability of shareholders to the equity they have contributed.
Synopsis: Discusses the corporate veil and circumstances where it might be set aside, and the alternative of debt financing.
Definition: Piercing the Corporate Veil -- Where a court disregards the legal fiction of the corporation and imposes liability against the shareholders.
Synopsis: Discusses the directors' and officers' liability and the use of holding companies and complex attribution arrangements to insulate the client from such liabilities.
Definition: Directors' and Officers' Liability (a/k/a D&O Liability) -- The direct, personal liability of directors' and officers' of corporations for their acts that adversely affect the corporation (and thus giving rise to a shareholders' derivative action) and for the corporation's acts which adversely affect others (as in the case of employment discrimination claims).
Synopsis: Discusses the advantages of debt financing of corporations over equity financing, and discusses some methods of debt financing such as convertible bonds.
Definition: Debt Financing -- The financing of an entity by borrowing or by issuing bonds or promissory notes, etc. From an asset protection standpoint, the advantage of debt financing to equity financing is that in the event of a bankruptcy the debtholders should have priority over general creditors of the entity in the distribution of the entity's assets.
Synopsis: Describes the function of the Trust Protector.
Definition: Trust Protector -- A person or entity who has certain powers under the trust document, usually to discharge (but not appoint) trustees, and to veto (but not make) certain key decisions of the trustees.
Synopsis: Discusses the use of Private Trust Company arrangements to act as the trustee of FAPTs.
Definition: Private Trust Company (PTC) -- A trust company directly or indirectly owned or controlled by the settlor of a trust. The concept is to give the appearance to third parties that the trust has an independent trustee.
Synopsis: Discusses how FAPTs and FLPs have been routinely combined to form “Family Fortresses”.
Definition: Combo Platter -- A widely-marketed cookie-cutter asset protection structure involving an FLP with the limited partnership interests owned by a FAPT. The strategy is that if a creditor attacks the FLP, the FLP is liquidated into the FAPT and all assets moved offshore.
Synopsis: Discusses the planning boom for offshore trusts occurring from the mid-1990s until the Anderson and Lawrence cases were decided in 1999 and 2000.
Synopsis: Discusses the problem of the settlor giving up control to a foreign trustee, and some of the disingenuous schemes created by offshore planners to attempt to circumvent this problem.
Synopsis: Discusses the downsides of FAPTs, their marketing excesses, the Doctrine of Disbelief, and why FAPTs are unlikely to ever find acceptance with U.S. judges.
Definition: Doctrine of Disbelief -- This doctrine holds that since no sane person would transfer all of their assets to a foreign trustee and risk the assets disappearing, it then stands to reason that they still retain some hidden control over the assets whether they admit to such control or not.
Ch. 12: Spendthrift Trusts and Discretionary Trusts
Basic Concepts Synopsis: Discusses the major variants of trusts in the asset protection context.
Spendthrift Trusts Synopsis: Discussion of spendthrift trusts and certain statutory exceptions to spendthrift provisions.
Definition: Spendthrift Trusts -- A trust that includes certain language giving the trustee wide latitude to avoid making distributions to beneficiaries where the distribution would go to a creditor, or where the trustee fears the distribution would be wasted by the beneficiary.
Definition: Domestic Asset Protection Trust (DAPT) -- A self-settled spendthrift trust formed in a U.S. state that permits such forms of trust.
Definition: Discretionary Trusts -- A trust that allows the trustee the discretion to make or not make distributions of benefits to the beneficiary, and to make unequal distributions among all beneficiaries.
Powers of Appointment Synopsis: Discusses the federal gift and estate tax effect of Powers of Appointment (POA).
Dynasty Trusts Synopsis: Discusses the benefits of Dynasty Trusts for estate planning.
Definition: Dynasty Trust -- A trust formed in a jurisdiction that has either abolished the Rule Against Perpetuities (which limits the duration of trusts) or has statutorily expanded the Rule Against Perpetuities for a period in excess of 100 years.
Beneficiary-Controlled Trusts Synopsis: Discusses the disadvantages of Beneficiary-Controlled Trusts from an asset protection viewpoint, and possible methods of mitigating those problems.
Trusts and UFTA Synopsis: Discusses the implications of gifting to fund trusts and the fraudulent transfer laws.
The Trust Defined Synopsis: Discusses the basics of trusts, and their place as a dissociative method.
Definition: Trust -- A relationship whereby one party (trustee) is given assets by another (settlor) to hold for the benefit of a third party (beneficiary).
Estate Freezes Synopsis: Discusses the concept of the "estate freeze" and how the methods used for asset protection planning and estate planning are often incompatible.
Definition: Estate Freeze -- The process of transferring assets to either the children or a trust for the benefit of the children now, so that the future growth of those assets is with the children or their trust, and not within the parent's estate. The asset protection equivalent is known as an "asset freeze".
Mass-Marketing of Offshore Trusts Synopsis: Discusses Global Prosperity, the "Father of Asset Protection" and other scams and hucksterisms relating to foreign trusts.
Definition: Self-Settled Spendthrift Trust -- A trust formed for the benefit of the person who created the trust, with spendthrift provisions that attempt to disallow a creditor from invading the trust assets or forcing a distribution to the beneficiary that the creditor would then seize.
Trusts and Giving Up Control Synopsis: Discusses the problem of yielding control to make the asset protection effective with the possibility that such control once yielded might never be regained.
Living Trusts Synopsis: Discusses the reasons why living trusts provide little asset protection.
Definition: Living Trust -- A revocable grantor trust.
Sham Trusts Synopsis: Discusses the many defects of Pure Trusts and their progeny.
Definition: Pure Trust -- A sham trust sold by scam artists that purports to be free of government regulation or intervention because of the Contract Clause of the U.S. Constitution.
Additional information on Pure Trust scams can be found at:
Definition: Homestead Exemption (a/k/a "Homestead Protection") -- A statutory exemption against collection given to certain interests in real property being used as the primary residence of the debtor.
References to each state's homestead acts are available via http://www.assetprotectionbook.com/state_resources.htm Other Exemptions Synopsis: Discusses other exemptions from collection other than homestead, such as for life insurance, annuities, property held in joint tenancy, and tenancy by the entireties.
Retirement Plans and ERISA Synopsis: Discusses how certain retirement plans are protected from creditors under state and federal law, but also how many plans are not protected.
Definition: ERISA Anti-Alienation Provision -- A provision found in the Employee Retirement Security Act (ERISA) that prohibits a participant in an ERISA-qualified trust from transferring his or her interest in the plan to others, and which effectively prevents a creditor from attacking the assets of the plan while they are in the trust.
Definition: 412(i) Plan -- A type of defined benefit plan that requires the use of insurance for funding, and which provides certain inherent asset protection advantages.
Footnote #2 should read: The following jursidictions that provide for Tenancy By The Entirety are Alaska, Arkansas, Delaware, District of Columbia, Florida, Hawaii, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, Mississippi, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, Tennessee, and Wyoming. Caution significant disparities between the quality of TbyE protection between states.
Jurisdictional Methodology Synopsis: Discusses how asset protection planning takes advantage of cross-jurisdictional issues.
Integrational Methodology Synopsis: Discusses how asset protection planning is integrated into other business, succession and other planning done for the client.
Unbundling and Separation Methodology Synopsis: Discusses the importance of unbundling the components of key assets, and protecting the components separately.
Definition: Unbundling -- The process of breaking an asset into components and treating the components as separate assets.
Definition: Complex Asset -- An asset that is capable of being broken into component parts.
Opportunity Shifting Synopsis: Discusses the titling of a wealth-creating asset outside the existing structure, for purposes of transferring wealth before it generated or received.
Definition: Opportunity Shifting -- The process of putting new wealth-creating assets into distanced structures, so that the wealth is created within those structures and not the existing one.
Structural Methodology versus Transfer Methodology Synopsis: Discusses the differences and relative importance between structural methodology and transfer methodology in the creation of an asset protection plan.
Definition: Structural Methodology -- The decision-making process for choosing the type of structure that will be utilized hold particular assets.
Definition: Transfer Methodology -- The decision-making process for choosing the type of transfer that will be used to move assets to a particular structure.
Challenge Analysis Synopsis: Discusses Challenge Analysis in its predominant forms.
Definition: Challenge Analysis -- The process of selecting forms of structures and transfers based upon what creditors know about those structures and transfers, and the level of efforts being made by creditors to penetrate them and set them aside.
The Perils of Unreported Offshore Accounts Synopsis: Discusses the realities of foreign financial accounts, the powers of the IRS and creditors to unearth such accounts, and possible criminal penalties.
Repatriation and Contempt Synopsis: Discusses creditors' remedies for collecting against offshore accounts by putting domestic pressure on the debtor.
Definition: Repatriation Order -- An order to the debtor to bring assets back within the jurisdiction of the court; if the debtor does not do so, typically the court will order the debtor incarcerated for contempt.
Offshore Banking Synopsis: Overview of foreign banking, scam banks in offshore jurisdictions, and the inadequacies of foreign investment markets.
Offshore Tax Schemes Synopsis: Discusses several popular, and sometimes tax evasive, offshore tax strategies, including reinvoicing, employee leasing, and the important of using a U.S. tax lawyer for international tax planning.
Definition: Reinvoicing (a/k/a "Transfer Pricing") -- An offshore tax scheme involving the creation of a middleman entity in a tax haven jurisdiction for purposes of skimming profits and thus decreasing the amount of U.S. income shown. The IRS has significant powers to combat such arrangements, some of which may amount to criminal tax evasion.
Definition: Offshore Employee Leasing (a/k/a "Irish Employee Leasing" or "Barbados Employee Leasing") -- A complex arrangement that attempts to utilize favorable tax treaties (usually with Ireland or Barbados) to facilitate (Step 1) a U.S. professional’s self-firing from his U.S. company, (Step 2) being re-hired by a foreign employee leasing company, (Step 3) being leased back to his own U.S. Company, and (Step 4) deferring a portion of his income in the foreign jurisdiction. Widely marketed throughout the United States, primarily by David Tedder (now a convicted felon) and certain professionals with whom he came into contact, those schemes are now being challenged by the IRS, and in a few particularly abusive cases there have convictions for felony tax evasion.
Definition: Fraudulent transfer (also known as a fraudulent conveyance) -- A transfer in derogation of the rights of a creditor to satisfy his judgment against the assets of the debtor.
Synopsis: Discusses the basic operation of UFTA, including how UFTA creates remedies for certain creditors who appear only after the transfer has taken place.
Definition: Uniform Fraudulent Transfers Act (UFTA) -- A statute that sets forth the fraudulent transfer laws of most states.
More information on the Uniform Fraudulent Transfers Act, including the text of the Act, original source materials, our commentary, and an exhaustive collection of the cases interpreting the Act, are available at http://www.assetprotectionbook.com/fraudulenttransfers.php
Synopsis: Discusses the result-oriented "bad tuna" test known as the "Badges of Fraud" that allows a judge to make a finding that a transfer was fraudulent even if the bright line tests were not met.
Definition: Badges of Fraud -- In the fraudulent transfer context, a historically recognized non-exclusive list of circumstances that tend to show that the debtor intended to make a transfer in derogation of the rights of creditors.
The Badges of Fraud are found in Section 4(b) of UFTA at http://www.assetprotectionbook.com/section_4_future_creditors.htm but please note that this list is not exhaustive and other facts may be considered. Indeed, under the Common Law, many more Badges were identified.
Synopsis: Discusses basic federal bankruptcy procedure, preferential transfers, and the interaction of the federal bankruptcy laws with state bankruptcy laws and exemptions.
Definition: Preferential Transfer -- A transfer that has the effect of alienating property in advance of a bankruptcy filing, and which may usually be set aside by the bankruptcy court within a defined time period.
Synopsis: Discusses planning done in advance of a bankruptcy filing to protect assets that will typically not be set aside at preferential transfers.
Definition: Pre-Bankruptcy Planning -- Planning that is done immediately in anticipation of a bankruptcy filing, and which seeks to maximize exemptions and avoid claims of preferential transfers.
Synopsis: Discusses anticipated changes to the federal bankruptcy laws that would have the effect of eliminating several favorable state exemptions, such as unlimited homestead protection.
Synopsis: The example is given of the Stephen J. Lawrence case and how by filing bankruptcy he converted a purely civil dispute into years of jail time.
Synopsis: Discusses the role of the planner in litigation involving the asset protection plan, and how a creditor may attempt to leverage the planner against the debtor.
Definition: Psychology of Settlement -- The parties' consideration of the totality of circumstances involved in a case as impacting their decision to settle the case or continue litigation.
Subtlety Synopsis: Discusses the foolishness of "in your face" asset protection planning, and the importance of subtlety in planning.
Creation of Offensive Opportunities Synopsis: Discusses planning that encourages creditors to overreach, thus creating counterattack opportunities for the debtor.
Transference Synopsis: Discusses planning that has the effect of transferring responsibility to a third-party, such as an insurance company.
Totality Synopsis: Discusses the importance of protecting all significant assets from creditors.
Containment Synopsis: Discusses the encapsulation of liability within entities.
Definition: Bankruptcy Remote Entity (BRE) -- An entity that acts to contain and resolve litigation away from valuable assets, and which can file for bankruptcy without subjecting the valuable assets to the bankruptcy proceeding.
Flexibility Synopsis: Discusses the importance of flexibility in the asset protection plan to meet changing circumstances and evolution of the laws.
Redundancy and Diversity Synopsis: Discusses the importance of making components of the asset protection plan "fail safe".
Definition: Defense-In-Depth -- A strategy whereby multiple layers of defenses are created with the idea that even though the creditor might ultimately be able to break through each layer, the creditor will eventually be worn down and settlement will be facilitated.
Asset Protection and Commercial Relationships Synopsis: The example is given of the businessman who borrows money from the bank to finance his business, and discusses under what circumstances it would be appropriate or inappropriate for the businessman to engage in asset protection planning.
Asset Protection and Fiduciaries Synopsis: The example is given of the stockbroker and his investor clients who lose money because of his actions, and discusses under what circumstances it would be appropriate or inappropriate for the stockbroker to engage in asset protection planning.
Asset Protection and Divorce Synopsis: The example is given of the husband who anticipates a divorce from his wife, and discusses under what circumstances it would be appropriate or inappropriate for the husband to engage in asset protection planning.
Application of Moral Issues Synopsis: Discusses the close relationship of moral issues in creating an asset protection plan to ultimate success or failure of the plan in the courtroom.
The Asset Protection Planner as Final Arbiter Synopsis: Discusses that an asset protection plan can unfairly defeat even a legitimate creditor, and that the planner thus effectively becomes the judge of which of the client's creditors should be paid.
Is the "Perfect Castle" Really So Perfect? Synopsis: Discusses that asset protection plans that are consistently too effective in defeating creditors will be defeated by either new legislation or judicial rules.
What Asset Protection Planning Is All About Synopsis: Discusses that asset protection planning is much more than simply protecting assets from creditors, and encompasses an important part of risk management planning.
Definition: Wealth Preservation – Planning that preserves wealth over time against numerous unforeseen circumstances.
Facing the Sleaze Factor Synopsis: Discusses the reasons causing asset protection planning to be perceived as sleazy.
Asset Protection and the Law Synopsis: Discusses the place of asset protection within American jurisprudence, the traditional relationship with aggressive tax schemes, the entry of CPAs into the asset protection market, trust mills and family limited partnership mills, and the multi-level marketing of tax-evasive asset protection structures.
Asset Protection and Legal Risk Management Synopsis: Discusses asset protection as it relates to the management of legal risks, and what bodies of law primarily constitute asset protection.
Asset Protection Planning Discusses asset protection planning as pre-litigation planning, and how everything is done in anticipation of it later being examined by a hostile judge.
Definition: Charging Order Protection -- This prevents a creditor of an owner of particular types of business interests from reaching the assets of the business and from gaining voting control over the business interest. Rather, the creditor can only get a court order charging the debtor's interest with the debt, meaning that the creditor will receive any distributions made in respect of the debtor's interest. If the person in charge of making such distributions never makes one, the creditor may be out of luck. Originally, this protection arose to protect nondebtor partners from the debts of other partners of a business enterprise. Typically, the availability of charging order protection is limited to partnerships and limited liability companies, which is why Family Limited Partnerships are a popular asset protection tool.
Keeping Ahead of Creditors
Discusses how debtors' strategies for protecting assets keep ahead of creditors' strategies for getting at the assets. Also discussion how asset protection is dynamic, and how bad strategies are not easily discarded by those who spent years promoting them.
Definition: Efficacy Known -- Those strategies that are readily identifiable and either do or do not work according to established law.
Definition: Efficacy Challenged -- Those strategies identified as asset protection strategies (typically in the marketing materials of asset protection promoters), but about which the law is not yet settled.
Definition: Innovative Frontier -- New and unique strategies that have not been identified as asset protection strategies, and which have not been the subject of studied attempts to pierce.
Discusses high-profile offshore promoters and now convicted felons Jerome Schneider and Marc Harris, how the client funds of Merrill Scott & Associates of Salt Lake City went missing, asset protection seminars using paid shills to encourage attendees to buy near-worthless kits, and Pure Trusts.
As of the writing of this book, offshore promoter Terry Neal, the author of "The Offshore Advantage", had not yet plead guilty and thus information about him was omitted. This information is available online at http://www.quatlosers.com/terry_neal.htm
