One out of three people will be sued this year.

Don't let it be you!

In the U.S., the number of lawsuits is increasing 7 times faster than the number of U.S. citizens. More than 100 million lawsuits are currently strangling our court system, awaiting action and resolution. It's so bad that federal judges in New York sometimes go 11 years to decide non-jury trials.

Every year, plaintiffs file 30,000,000 new lawsuits. That averages more than 82,000 lawsuits per day!

A plaintiff doesn't have to win a lawsuit in order for you to lose. Lawsuits are a bullying tactic that plaintiffs use to force you to pay money. They know that if they sue you, you will do what they want by paying them off to get rid of them. This is because the cost of hiring defense lawyers and going to trial is far more expensive than most business owners,  executives and professionals can afford.

A lawyer suing you knows that you will likely pay up to make them go away. Or they will tie you up in court 2 to 5 years and then the jury will make you pay. Either way, you lose your money. 

If you win the case, it will be at a steep price. You could easily end up paying $100,000 or more to your law firm to defend yourself.  Our legal system doesn't give justice when it comes to the price of lawsuits. 

Enjoy the first chapter of William Reed's bestseller, Bulletproof Asset Protection and let us know if we can answer any questions for you.

BULLETPROOF ASSET PROTECTION
by William S. Reed, J.D.

CHAPTER 1

IS ASSET PROTECTION AVAILABLE TO EVERYONE?
 

I grew up in a rural setting in the state of North Dakota. It shares its northern border with Canada, so it gets cold there. With long, wind-chill winters, a sparse population, and no sizable cities, people tend to be self-sufficient. I was always taught that each person had a duty to take care of himself and protect his family. Farmers and ranchers grind out a living working the land or raising livestock. They view lawyers and governments as Thomas Jefferson did, as "necessary evils." They're law abiding citizens (Republican, mostly), but they resent government intrusion with a fervor. The welfare rolls are short, and the unemployment rates are low. The farmers live with the uncertainty of bad weather that can ruin a year's work. There are no ocean views, balmy beaches, or picturesque mountains. As Mark Twain used to say, they're the kind of people that "make do." In other words, they not only believe in the Bill of Rights, they also live the Bill of Rights. Free speech, the right to assemble, and the right to bear arms are all part of their lifestyle. Individual freedom is not only paramount, it's one of their few luxuries.fevernment is something to be tolerated, not revered.

In the 1960s, I left North Dakota to attend college and law school. The Vietnam War was raging and my fundamental distrust of the government made me a natural leader to protest our involvement. As much as the war, we distrusted the government's leader, Richard Nixon. In 1968, he ran for President on the platform that he would withdraw our troops and end the war. He lied. After getting elected, he announced we could not have peace "without honor." So, he escalated the war (remember his "incursion" into Cambodia in 1970 causing the Kent State imbroglio) causing tens of thousands of additional casualties. In the fall of 1970, he substituted a lottery system for the draft in hopes of deflating the antiwar movement. To some extent the ploy worked. People like myself who drew high lottery numbers were allowed to walk away from the fighting and the possibility of having to move to Canada. Of course, we eventually lost the war entirely in humiliating fashion. Everyone remembers the grainy footage of desperate Americans scrambling to the roof of the U.S. Embassy to hastily board helicopters as the Viet Cong rode into the city on their tanks rejoicing in victory.

Eventually, everyone's suspicions about Nixon's integrity were proven true. After his impending impeachment and resignation, only a career ending pardon from his successor, Gerald Ford, prevented him from going to prison. Moreover, when the infamous White House tapes were ultimately released, Nixon's paranoid tirades were revealed in their unvarnished state.

With this as a backdrop, I graduated from law school in 1975 and opened my law practice as a sole practitioner. Business was slow, so I tended bar five nights a week to make ends meet. As you might imagine, I defended drunk drivers and a lot of divorce work. One of my customers owned a large company that managed apartment buildings and other rental properties. He figured I'd work cheap and appreciate having any work at all. He was right. I was introduced to the world of evictions and collections. Over the next fifteen years I developed a legal machine that specialized in processing county court eviction and collection cases.

We garnished paychecks, seized bank accounts, liened houses, and snatched automobiles. As the years marched by, I learned firsthand from the defendant-debtors how to protect assets from a court judgment. I just knew some debtors were careful not to have anything in their own name, to make sure their wife owned the house and that their other assets were held by a corporation. We were handling over 1,000 cases a month, so when we got a judgment and couldn't garnish a paycheck, seize a bank account, or lien a house, we dropped it and moved on to more collectible cases. Most collectors recover between ten and thirty cents on every dollar owed and we were no different. Volume was the key. Lots of cases, dump the difficult ones, press hard where there were assets. Business was good, the karma was bad.

With the passage of the 1986 Tax Reform Act and the subsequent collapse of the banking industry, many of my wealthy real estate clients lost their apartment buildings to foreclosure and were sued when the buildings sold for less than the mortgage amount. That was 1988. They came and implored me, "Bill, where can we put our money where it's safe?" So I went to the library (that's the building we used to go to before the Internet) and discovered the fledgling world of asset protection. In 1990, I appeared in court for the last time. I traveled to dozens of countries to learn first hand the mechanics of asset protection and which jurisdictions specialized in helping Americans protect their assets from lawsuits and governmental agencies. It was the best decision I ever made.

For over twelve years I've been helping people protect their assets from lawsuits, lawyers, or worse. And although it generally goes unspoken, most people wonder if protecting their assets from private lawyers and the government is legal and (dare I say) moral. With regard to the legal question, the short answer is, "Yes, it's legal."

It's interesting to note that most people understand why wealthy, English rock stars renounce their homeland to protect their assets. No one was shocked when the grandsons of eccentric billionaire oil tycoon John Paul Getty renounced their U.S. citizenship and became tax refugees by becoming Irish citizens. Or that Madonna, Michael Jackson, or O.J. Simpson has used corporations to shield their wealth from creditors. In the United States, we have a double standard when it comes to asset protection. When wealthy, famous, or powerful people protect their assets it's called "financial planning," but when everyday people like the rest of us move our assets out of the reach of lawyers, it's called "defrauding our creditors." And, if an arm of federal government is involved, such as the IRS or the U.S. Customs Service, they'll describe your activities as a form of "money laundering." Asset protection is not a privilege, it is a freedom protected by the Constitution. However, as the late filmmaker Samuel Goldwyn once said, "Timing is everything."

Don't wait until you're a defendant in a lawsuit or the target of an IRS investigation to consider protecting your assets. If a creditor has a legitimate claim against an identifiable asset, it may be against the law to transfer or sell that asset. Most states endorse the Uniform Fraudulent Conveyance Act that prohibits a debtor from transferring his assets with the intent to hinder, delay, or defraud a known creditor. You've got to protect yourself before the storm approaches, not in the middle of it.

A few years ago, a young, smart plastic surgeon came to my office to ask about asset protection. At the time, he didn't have any assets. In fact, he was in debt for his student loans and other expenses incurred while he learned to be a doctor. But he had recently joined a medical group of other plastic surgeons and was confident about his financial future.

We formed two Nevada corporations and one offshore corporation to own or mortgage any real estate he had and to hold any other liquid assets he intended to acquire. As the years ticked by, my client bought a house, leased a new Mercedes, and set up an offshore stock brokerage account. He maintained each of his corporations, keeping them in good standing, and always used me as his nominee officer and director.

A few months ago we had lunch and he showed me a thick stack of legal pleadings naming him as one of the defendants. The plaintiff was a disgruntled patient of one of the other surgeons in the medical group. Her breast enlargement wasn't big enough, allegedly causing her pain and suffering, emotional distress, and dysfunctional sex life. Although my client had never even seen this patient, her lawyers were careful to name all the doctors in the group, hoping for a larger settlement.

Although the medical group carried liability insurance, each of the doctors still had some potential personal liability. Further, the more the insurance company was required to pay, the more their premiums would go up. My friend went on to explain that before any answer or responsive pleading was filed, his attorney explained to plaintiff's counsel that he had no assets. Counsel for the plaintiff laughed and turned the matter over to a private investigator. After searching the Internet, real estate and banking records, and obtaining a complete credit report, counsel for the plaintiff grudgingly was forced to admit that my client owned nothing. The case against my client was quietly dropped.

His timing and foresight were impeccable. To this day he carries on as a plastic surgeon with a minimum of malpractice insurance, doing the work he genuinely loves.

The other unspoken question surrounding asset protection goes something like this, "All right, it's legal, but if I do this am I some kind of cheater or shyster?" In other words, people are concerned that they will be accused of abiding by the same moral code practiced most members of the legal profession if they shield their assets from the courts. Without delving into any kind of philosophical or religious discussion of morals, I can only say that once you have accumulated assets, you can be sure any money-hungry lawyer or federal government agency will not allow any moral code to dampen their enthusiasm for seizing your cash.

Here are just a few of the areas where your
wealth may be threatened:

 1. Divorce. Marriage is a beautiful thing, but it works only about half the time. A prenuptial agreement is a good idea, but the courts routinely fail to uphold them. Recently, the California Supreme Court set aside the prenuptial agreement signed by a wealthy baseball player and his wife on the grounds that "she wasn't sure she knew what she was doing," even though she was represented by counsel at all times. Your best protection is to establish a separate, private financial life that is known only to you. The price of falling in love shouldn't include the loss of all your assets when the flame dies.

2. Taxes. An IRS tax audit may leave you with a large assessment for taxes, penalties, and interest that you are unable to pay and that are not dischargeable in bankruptcy. The cost of challenging the IRS in court is prohibitively expensive for most people, and your assets are frozen if you choose to grind your case through the court system. Better to have your assets where the IRS can never seize them or know about them. 

3. Medical expenses. Unanticipated medical bills for you or a family member that are not covered by your health insurance policy or HMO can become staggering. As a collection attorney, I knew the best debts to take to court involved unpaid medical bills. The debtor, or a member of his family, could rarely argue they never contracted for or received the services. If the debtor didn't go bankrupt, we'd get 25 percent of his paycheck until we were paid.

4. Negligence lawsuits. These can be filed by the customers of your business as the result of the activities of your employees. Your delivery driver that gets drunk and slams into a school bus is your responsibility. Oh, I know, we all carry insurance, but what if your limits aren't high enough or the insurance company refuses to pay?

5. Uninsured motorists. In an automobile accident with an uninsured motorist when the damages exceed your insurance policy limits, you may have to pay the difference.

6. Sexual harassment suits or other claims filed against you as an employer. This is a growing area of litigation, which favors the plaintiffs.

7. A failed business venture. Your former best friend, business partner, and confidante become your newest worst enemy. IRS agents have stated on numerous occasions that the primary source of independent informers on tax cheats is ex-wives or girlfriends and ex-business partners. And as anyone knows, blood is not always thicker than water.

8. Loan guarantees. You sign as a personal guarantor for a loan to a family member or friend. The loan goes into default and the lender sues you.

9. Currently, the fastest growing threat to your wealth is the federal government. Between the years of 1985 and 1995, government seizures increased by 2,000 percent according to a congressional report. Yet according to government watchdog groups, 80 percent of those who have had their property seized were never charged with any crime. The government knows most people can't afford to challenge the onerous legal machinations of a federal agency. The notion of innocent until proven guilty has been turned upside down.

Any U.S. citizen with property or financial assets located in the United States should be aware of the threat of civil asset forfeiture. Over the past twenty years, the federal government has quietly increased its police power to confiscate your real and personal property. All they have to do is allege that the target asset was somehow used or involved in some ambiguous criminal activity and the asset can be seized without notice. You may be tempted to dismiss this threat as something reserved only for drug dealers and money-laundering criminals, but I urge you to beware.

There are currently over a hundred different federal forfeiture statutes designed to cover any kind of misconduct, whether it be criminal or civil. For instance, a woman in Los Angeles had her car confiscated after the police arrested her husband in the car with a prostitute. (As is she hadn't suffered enough.)

In Las Vegas in the summer of 1998, the U.S. Customs Service seized twenty-four checking accounts from a local bank without due process of law. Eighteen of the accounts belonged to innocent victims who had nothing to do with the U.S. Customs investigation. Nevertheless, they were forced to spend tens of thousands of dollars on attorney's fees in an attempt to recover their money. In this case, with one affidavit from one customs agent, the customs service was able to obtain a seizure warrant signed by a federal judge in Southern District of New York, allowing them to seize the accounts without any notice or hearing of any kind. An isolated case? Maybe.

In 1988, when I was still a practicing collection attorney, I had lunch with a grizzled old federal judge. With wiry grey hair and the build of an NFL linebacker, he was an ominous figure even without the imposing title of federal judge. We were trading war stories about the collection business and ruminating over the fact that the people with the most money were the hardest to collect from. I explained that sometimes a crafty debtor could transfer his assets out of his name, making them hard to attach. At that time, Family Limited Partnerships and Trusts were being touted as ironclad asset protection devices, even though we routinely convinced judges to pierce them, allowing my clients to seize the assets.

As we cut into our charred, medium-rare filet mignon, the judge let out sort of a grunt. Not a laugh. Just one of those grunts that warns a trial lawyer that his legs are about to be cut off at the knees. Federal judges don't make big money, but they make up for it in power, prestige, and their ability to deliver pain. And every one of their orders is backed up and enforced by the full weight of the federal law enforcement and military power. And…federal judges are appointed for life. Forget contested elections, power-hungry politicians, or any bar association, federal judges cannot be removed from the bench short of egregious felonious conduct. A federal judge is as close to a god as a democracy dares allow.

At the time of our lunch, President Reagan and the law and order crowd had convinced Congress that federal judges were not giving criminals enough jail time. They thought the courts were "soft" on crime. So Congress enacted legislation creating mandatory federal sentencing guidelines, eliminating some of the judges' discretionary powers, at least when it came to sentencing. The judge carped openly, between sips of expensive merlot, about those "moron congressmen" and their ability to curtail a federal judge's "constitutional prerogative." History has shown the judge's rankling to be on the mark. We now have prisons full of nonviolent marijuana users doing ten years or more under the mandatory sentencing guidelines.

As a gorgeous tray of too-pretty-to-eat desserts was wheeled to the side of our table, the judge announced that no one was going to screw with his plan to exact pain on those "greedy bloodsuckers" that sent our banks down the tubes. (I digress. At the time, the nation was in the throes of a banking industry meltdown and the government was looking for people to blame. They sued the borrowers, the bankers, the lawyers and accountants who worked for the bankers, and anyone else they thought they could recover money from. Because the banks were federally insured, most of these cases ended up in front of federal judges.)

The judge relished the thought of the local big shot real estate developers being forced to give up their Gulfstreams and young trophy wives. As a collection attorney, I interjected that even when rich people seem to lose everything, they never end up living like poor people. They always seemed to hang on to their cash and their lifestyles. The judge pursed his lips, flopped his hand towards the waiter, and in the manner that only a guest certain his subordinate host will be paying the check can do, ordered a generous snifter of brandy rated with enough stars to fill a flag.

As he gently swirled the mahogany colored brandy in his heated snifter, the judge cleared his throat. An untimely interruption here could cost you jail time. I sat up straight…and waited. Either he was going to play the mentor and share some valuable tribal secret with me or I was going to eat one of those "why the hell did you choose to be a collection lawyer in the first place?" lectures. He gently set his snifter directly in front of him and cupped both hands around the bowl of the glass. He looked me squarely in the eye and without a trace of emotion in his voice - but with the steely resolve that only a man with the power to sentence someone to death can give - he said evenly, "Bill, if you can find an asset anywhere within my jurisdiction (i.e. United States), I can seize it. Don't ever forget that." (I didn't.)

With that, he placed his starched white napkin on the table, thanked me for lunch, and excused himself. It may not have been a tribal secret, but it confirmed the worst nightmare of every defendant and lawyer. No matter how carefully you attempted to protect an asset - partnership, trusts, whatever - if a federal judge can find it, there is a chance you could lose it.

This lunch was a turning point for me. Something clicked. Epiphany, revelation, awakening…whatever you want to call it, I realized I was in the wrong business. I was pounding my way through the courts day after day for a percentage of whatever assets I could recover from a bunch of unwilling, feisty debtors. On the other hand, what people pay to protect their assets from such a system?

If a federal judge could locate an asset, he could seize it. A rational person would argue that this is illegal, unconstitutional, or at least immoral. And they would be right. But federal judges are appointed for life; to appeal their decision takes years, and it costs a fortune!

As the 1980s ended, the banking industry was in shambles and dragging down the real estate industry with it. At that time, my practice was limited to doing evictions and collection work for the wealthy owners of apartment complexes and other commercial buildings. Many of these same clients lost their real estate holdings to foreclosure and were preparing to be sued by lenders, partners, and the federal agencies that insured the banks. They implored me to find a safe haven for their cash and other liquid assets.

As all lawyers with a whit of common sense seem to do in their fifteenth year of practice, I was suffering from burnout. A few years ago a poll was taken of all California lawyers. Over 70 percent of those questioned admitted they would quit the practice of law in a heartbeat if they could afford it. You have to figure that half of the remaining 30 percent were fudging, so I figure closer to 85 percent of all California lawyers would quit if they could. They just couldn't bring themselves to admit they'd wasted so much time and money to become a member of a profession that offered so little beyond a steady income.

I, however, took the plunge. After appearing in court for the last time in 1990, I surrendered my license, moved to California, and carved out a career outside the courtroom protecting people's assets.

Recalling the judge's words, I realized that any asset protection plan needed to include two elements to succeed:

1. Privacy. To avoid seizure, an asset must be difficult or impossible to find.

2. A safe haven. Some assets would have to be placed beyond the grasp of my federal friend. That would mean outside the United States. Let's consider the privacy issue first.