Orange County Office:
17011 Beach Boulevard, Suite 540
Huntington Beach, CA 92647
Main Number 714-848-8200
Asset Protection has significantly gained in prominence over the past few years. The declining fortunes of real estate developers and investors facing personal guarantee calls, coupled with business owners teetering on the verge of bankruptcy, resulted in a boom for this industry. Asset protection deals with structuring asset and business ownership to make it either impossible, or at least very expensive and difficult, for a litigant or a creditor to reach the assets of a debtor.
The goal of asset protection is similar to bankruptcy, and the two practice areas go hand-in-hand. When a debtor has none to few assets, the bankruptcy route is preferable. When the debtor has significant assets, asset protection may be the way to go. There is no “magic bullet” in asset protection planning.
Many structures are available to practitioners, with their use determined by aggressiveness of the creditor, timing, types of assets that need to be protected, and how far the debtor is willing to go to shield his assets.
When contemplating a plan for asset protection, practitioners and their clients often focus on the most exotic approaches, such as foreign and domestic trusts, transmutation agreements, and limited liability companies. Indeed, they often overlook the fundamentals of asset protection, including exempt assets-those that cannot be seized by creditors because they are exempt under federal or state law.
Any asset protection plan should begin with an inventory of the client’s exempt assets, which should in turn lead to an inquiry whether the client’s nonexempt assets can be converted into exempt assets. For debtors whose assets are in California, exempt assets offer powerful planning opportunities.