How to Select an Asset Protection Attorney
by Jay W. Mitton, MBA, JD

Now let's get serious about taking the time to create your own total asset protection plan. The first step is to list the personal and business assets you need to protect. Take a minute and download a simple net worth worksheet that you can use to compile your assets and the debts against them.

Once you have completed your list of assets and debts, you need to find an attorney to help you restructure the ownership of your personal and business assets for maximum protection.

An asset protection attorney must have a firm grounding in tax law and estate planning. Here are some ways you can find an attorney to help you.

1. Call your local bar association and request the names of attorneys who are expert in asset protection or advanced estate planning.

2. Ask an attorney in general practice or your accountant to recommend an attorney knowledgeable in asset protection. Attorneys and accountants who are not expert in this particular field will nonetheless have attended professional meetings at which asset protection experts speak.

3. Talk to a friend or business associate who has created an asset protection plan for the name of the attorney who designed the plan for him or her.

4. If you cannot find an attorney through any of these methods, look in the Yellow Pages. Briefly interview the attorneys you choose over the phone to get an idea of their qualifications.

When you interview an attorney on the telephone, ascertain how many funded living trusts, limited partnerships, and limited liability companies he or she has set up during the past year. An attorney experienced in asset protection will be quite active in these areas. Ask the attorney to describe a recent client's situation, without divulging the client's name or confidential information, and the asset protection designed for that client. Don't be afraid to ask hard questions. You have spent your lifetime accumulating your assets and you deserve to find someone who is knowledgeable and experienced to help you protect them.

After you have interviewed several attorneys by telephone, you will probably have found one who sounds knowledgeable and with whom you feel you'll be able to establish some rapport. Arrange to meet with the attorney to discuss how legal ownership for your property should be changed.

If the attorney grasps the concepts well, you should take comfort that you are probably talking to an expert who can help you with your needs.

Here are some of the questions you and the attorney should discuss, and the answers you might expect. Here also are some possibly dangerous answers that reveal that the attorney is not familiar with the asset protection tools you have learned in this book and may not be able to adequately protect your assets.

Asset: Your Home

Question to Ask:
In the event of a lawsuit, what form of ownership would provide superior-asset protection?

Favorable Answers:
1. Limited partnership.

2. Limited liability company.

3. An irrevocable trust.

Possibly Dangerous Answers:
1. Holding title in the less vulnerable spouse's name or in his or her living trust.

2. It doesn't matter how you hold title; a creditor will take your home to the extent its equity exceeds the homestead exemption anyway.

2. Just keep everything in joint ownership and don't worry about it.

Asset: Stocks, Bonds, and Mutual Funds

Question to Ask:
In the event of a lawsuit, what form of ownership would provide superior asset protection?

Favorable Answers:
1. Limited partnership.

2. Limited liability company

3. An irrevocable trust.

Possibly Dangerous Answers:
1. Holding title in the less vulnerable spouse's name or in his or her living trust.

2. It doesn't matter how you hold title; a creditor will take your assets no matter what you do.

2. Just keep everything in joint ownership and don't worry about it.

Asset: Business Real Estate

Questions to Ask:
Should I keep business real estate in the same corporation in which I operate my business? Should I separate my business real estate from my personal assets?

Favorable Answers:
1. It is frequently advisable to keep business real estate outside the business corporation to reduce its vulnerability to lawsuits, liens, and levies against the business operations.

2. Rather than owning the business real estate personally, it might be desirable to place business real estate in a limited partnership, limited liability company, or a children's trust and then lease it back to the business.

Possibly Dangerous Answers:
1. It's really not important to separate business real estate from your business operations or personal assets.

2. Just keep all the assets of your business together in your single business corporation. You don't want any complex ownership scheme complicating your life.

Asset: Business Equipment

Question to Ask:
How should my business equipment be owned?

Favorable Answers:
1. It could be owned by the corporation.

2. It could be owned by a family trust, children's trust, limited liability company, or limited partnership and leased to the business corporation.

Possibly Dangerous Answer:
Don't worry about the remote possibility of a lawsuit. Just keep the business equipment in your own name, or in joint ownership with your spouse.

Other Asset Protection Issues

Question to Ask:
In which state is it best to incorporate a business in?

Favorable Answers:
1. Nevada.

2. Delaware.

Possibly Dangerous Answer:
It really doesn't matter; all states are the same.

Question to Ask:
How many limited partnerships or limited liability companies have you set up in the past year?

Favorable Answer:
Five or more.

Possibly Dangerous Answers:
1. I've never personally set these up.

2. I've read about them and they are so complex that the IRS considers them illegal.

3. You will be audited frequently by the IRS if you use such entities.

Question to Ask:
Would a children's or grandchildren's trust be beneficial to me?

2. You can save income taxes with these entities if the children or grandchildren are fourteen or older.

Possibly Dangerous Answer:
I don't recommend children's trusts because they are under constant assault by the IRS, and besides, they don't work anyway.

Question to Ask:
Should I use one corporation or two to operate my business?

Favorable Answer:
If your business can be divided into two or more subparts, it may be advisable to use two separate corporations; in that way the assets of one corporation are insulated if the other corporation is sued.

Possibly Dangerous Answer:
Multiple corporations are far too complex. The simpler your business operations and asset ownership, the better off you will be.

Question to Ask:
Explain to me how the charging order protects assets.

Favorable Answer:
The charging order generally restricts the creditor from seizing assets inside limited partnerships and limited liability companies. It is one of the most unique asset protection provisions there is.

Possibly Dangerous Answer:
I've never heard of a charging order before. All you really need to protect your assets is a living trust. (This question pointedly reveals the level of sophistication of the attorney. To date I have never met a general practitioner attorney who can answer this question.)

Of course, there are many more questions that you can ask your estate planner. However, these questions are sufficient to get some indication of how comfortable your adviser is with advanced asset protection strategies. If the adviser hedges or bluffs on most of the answers, or simply doesn't know the answers, it may be an indication that your estate planner is not very familiar with these rather complex interwoven issues. Each day, more and more attorneys are jumping on the asset protection bandwagon. It is important to choose an attorney thoroughly versed in the nuances of the law, since the field is very complex. If documents are improperly drawn, fatal flaws will allow easy unwinding of your protection plan and will enable creditors to seize your assets.

In Conclusion

Over the years, I have seen much potential malpractice in this field and much amateurism. You cannot afford that-if the advanced estate planning and asset protection is done incorrectly, you could lose everything. Unfortunately, if your planning is incorrectly done and you suffer loss as a result, you may not be able to recover in a malpractice action against your attorney. This is because, in most situations, an attorney is generally not held to the standard of an expert estate planner. The legal standard for determining malpractice is generally: What would an average attorney in the local area have done for a client in similar circumstances? Unless most of the lawyers in your community are experts, a higher standard of expertise will not normally be applied. So don't assume that if something goes wrong, you will just sue the attorney for malpractice. Rather, carefully interview three or four estate planners and then pick one to help you devise the best system for protection of your hard-earned estate.