Follow us

Discussing asset protection with your clients: a guide for attorneys, CPAs, and financial planners

According to the Wall Street Journal (July 15 – 16, 2006), asset protection planning has become “mainstream” planning.  And just as planning professionals are obligated to advise clients on estate planning and financial planning matters, many feel that the same professionals are now ethically obligated to advise clients on asset protection matters.

To determine if you should discuss asset protection with your client, ask yourself these two questions:

  1. Are your clients confident that they will never be sued?
  2. Are your clients confident that if they are sued, they will be treated fairly by our legal system?

If you answered “NO” to either of these questions, then read on.

Asset protection forces favorable settlements

The Headline of an article in the October 1, 1995 Florida Bar News read: “MOST LITIGANTS IN TORT CASES SETTLE.” But what forces settlements in these cases?

There are two primary reasons most cases settle:

  1. DOUBT AS TO LIABILITY: uncertainty that the defendant can be proven liable.
  2. DOUBT AS TO COLLECTIBILITY: even though there is certainty that the defendant can be proven liable, there is uncertainty that a judgment can be collected.

While even clients who follow their lawyer’s advice to the letter can become liable for something beyond the scope of the lawyer’s advice, one can, through proper asset protection planning, create significant doubt as to collectibility.

Definitions for your clients

Effective asset protection planning involves an offshore trust.  Certain definitions simplify the process of explaining asset protection and the offshore trust to your client.

“Asset Protection Planning”:

  1. It’s another estate planning tool
  2. It’s the arrangement of one’s financial affairs in a such a way as to place assets beyond the reach of future potential creditors, while your client continues to enjoy and benefit from them
  3. It does not involve secret transfers, tax evasion, fraud, or similar schemes

“Creditor”: any person with a claim against your client.

“Offshore Trust”:  A trust under which at least one trustee is resident outside of the United States (and its territories and possessions), and some or all aspects of which are construed, interpreted, and otherwise subject to the laws of a foreign country (usually, but not necessarily, the same country where the non-U.S. trustee is resident).

How to identify potential asset protection clients

Offshore-based asset protection planning is not for everyone.  In some instances, you will get the feeling that “you can lead a horse to water, but you can’t make him drink”, when a client for whom you are certain asset protection planning is appropriate declines to proceed. Taking into consideration the legal fees, initial and ongoing trustee fees and other costs, the planning must make (personal) economic sense to the client. “Beauty is in the eye of the beholder”, and so is economic sense.

If we are looking for a sort of benchmark, however, we’ll say that if a client has at least $500,000 in unprotected liquid assets (cash and publicly traded securities), or more than $1 million in equity in real property, asset protection planning should be considered and discussed with the client.  For these purposes, unprotected liquid assets are considered cash and securities not held in a protected IRA or other qualified creditor exempt retirement funds.

Certainly, the client’s exposure to potential claims from the client’s profession, investments, or otherwise is of primary importance, but if the costs of the planning are “out of budget”, the client will pass.

So, who needs asset protection planning?

  1. Real Estate Developers / Investors.
  2. Business owners; Businesses
  3. Sellers of businesses.
  4. Health care providers.
  5. Accountants, auditors, and actuaries.
  6. Architects, engineers, and appraisers.
  7. Parents of teenage drivers.
  8. Officers and Directors of public companies or charities.

Introducing the concepts to eligible clients

Most clients for whom this type of planning is suitable will already be aware of it, but will usually require further explanation from you. It is often helpful to explain the elements of the protective structure with the use of a graphical representation. In this manner you can (for example) point to the limited liability company or the trust while explaining the respective protective aspects. We have found that, although we recommend against it, most clients will wish to retain direct control over their assets while at the same time protecting them. Client control retention should be discouraged to the greatest extent possible. Those clients who insist on retaining direct control should be instructed regarding the lessons of the Anderson case (FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 6-15-99)) and the Lawrence case (In Re Lawrence, 251 BR 630 (July 2000).


Although not ideal, if the client insists, and the circumstances permit, retaining control can be accomplished through the use of a structure which combines an LLC (or limited partnership) with the offshore trust in a way which permits the client to have 100% of the control of the protected assets, while vesting a significant percentage of the ownership of same in the offshore trust. For some background material, see, H. Rosen, Asset Protection and Retention of Control: Is Peaceful Co-Existence Possible? (Univ. Of Miami Bus. Law Journal, Fall 1992; https://protectyou.com/articles/UM_ART.htm).

Refer the clients to a qualified attorney

The international, federal, state, and tax law intricacies of asset protection planning are not easily mastered by a planning professional new to the field. In many instances, engaging in this practice when the professional lacks the proper experience will be deemed unethical and/or malpractice.

The law firm of Donlevy-Rosen & Rosen, P.A. has focused its practice on offshore asset protection planning for more than 20 years, and should be considered a resource for attorneys, CPAs, or financial planners, with clients eligible and interested in asset protection planning. Because the firm concentrates its practice on asset protection only, planning professionals need not be concerned about losing clients or business. In fact, fees are often generated by the referring professional as a result of additional due diligence documentation, asset transfers, and tax filing requirements for clients with offshore asset protection trusts. Call us 305-447-0061 or simply send us a message using our contact page