What is the Goal of Asset Protection Planning?

One of the most widely discussed and often misunderstood topics in asset protection planning is this – how does one measure whether an asset protection planning has been successful?
Clients often come to me asking for a “bullet proof” structure.  Some envision a scenario where they can retain ownership (or at least control) of 100% of their assets regardless of how much they might owe creditors or what judgments might be entered against them.  These types of expectations are unrealistic – but more importantly, they reveal a lack of understanding relative to what the actual purpose of asset protection planning is.

No asset protection structure works with 100% certainty.  There is no such thing as a “bullet proof” structure.  There is certainly no “one size fits all” solution for asset protection planning, and even highly customized structures are never “perfect”.  So what good is asset protection planning?  What should we view as a realistic result from an asset protection plan?
One primary goal of asset protection planning is to make your assets as difficult and expensive for your creditor to reach as possible.  If you make it difficult and expensive enough, you change the creditor’s economic analysis of their case.  You force the creditor to re-evaluate whether it is worth their time, effort, expense, headache, etc. to pursue collection from you.
What typically happens when a creditor is confronted with a proper asset protection structure?  Sometimes creditors throw their hands up and walk away – a grand slam home run for you and your asset protection plan.  Most of the time, it forces the creditor to settle with the debtor for an amount that is far less than they otherwise would have accepted but for the existence of the asset protection structure.  If the existence of your asset protection structure forces a creditor to settle for pennies on the dollar, that is without a doubt a victory.  You can claim success and consider the fees you paid to implement your asset protection plan as money well spent.
In summary, asset protection planning can buy you valuable leverage in a negotiation.  Sometimes it can force a creditor to give up its case against you, and other times it can drive a settlement with a creditor that you never would have gotten without it.

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