Could You Be Legally Mugged?

Ever been sued? Ripped off in court over some frivolous complaint? Threatened with ruination by a dubious creditor? If not, count your blessings — at least for now. Chances are you will be legally mugged sometime during your career and often more than once. More than four out of ten professionals already have been taken to the judicial cleaners in what is euphemistically called the “lawsuit lottery.”

The best scenario, of course, is that a lawsuit never materializes. But if one does, your worst enemy may not be a predator lawyer with a frivolous case. It may be unpreparedness. That’s an open invitation for a predator attorney to manipulate the dysfunctional U.S. tort system so your hard-earned assets are put in jeopardy. Being unprepared typically stems from two factors:

• A mistaken belief that your assets are safe because you’ve done nothing wrong.
• A false sense of security that malpractice and other forms of insurance immunize you against the vagaries of America’s favorite pastime – suing each other.
  The sad truth is that in the “lawsuit lottery” the odds are often stacked against defendants. And insurance, while important, may be woefully inadequate in the face of out-of-control lawsuits and skyrocketing judgments.

But there is good news! There are effective legal tools available to help protect client assets from today’s unbridled explosion of abusive litigation. While no one is 100% safe from litigation, the ultimate deterrent against frivolous lawsuits is an asset protection plan that:

• Deters litigation by shielding assets from public scrutiny and insulating them from the risk of liability.
• Minimizes the economic incentive to sue and, when necessary, puts your vulnerable assets beyond the reach of the U.S. court system, without relinquishing your beneficial ownership or distributive rights to those assets.

Here’s how the process works:

At the core of every Lodmell & Lodmell asset protection plan is the Asset Management Limited Partnership ™ (AMLP) that:

• Creates a legal barrier between you, your assets and whoever covets them.
• Acts as a haven for your “safe” assets.
• Can generate income.
• Can facilitate the transfer of assets.

Closely tied to the AMLP is the Bridge Trust ®.

• It serves as the majority limited partner of the AMLP and acts as a U.S. Grantor Trust for income tax purposes. As such, the Trust is tax neutral, meaning you must pay tax on any income derived from its activities.
• However, if the Trust is “triggered” by an “event of duress,” the Trust becomes governed by the laws of the Cook Islands.

In the Lodmell-prepared Trust, the “Settlor” (the client) may also be the “Trustee” who manages the Trust until the “Protector” assigned to oversee the Trust declares an “event of duress” – legal speak for, “You have just been sued!”

If the assets are never threatened, they remain in the AMLP and nothing changes. If the Trust is triggered, however, a foreign “Special Successor Trustee” previously chosen by the Settlor, steps in and transfers the assets to a jurisdiction beyond the reach of the U.S. court system. (Some asset protection attorneys prefer to create a Trust without an FLP, opting instead to “internationalize” the assets from the get-go. At Lodmell & Lodmell, we prefer the far less expensive but effective alternative of pairing the AMLP with the Bridge Trust ®, and internationalizing the Trust only if and when the assets are threatened.)

With the consent of the Protector, the Trust’s assets are deposited in an offshore bank, which is subject to multiple checks and balances to ensure the integrity of the client’s assets. 
Although no longer in direct control of the Trust, the Settlor (client) can remain the Trust’s investment advisor and beneficiary. While the new Trustee may be said to “control” the assets, the Trustee can do nothing without the consent of the Protector, who was appointed by the client and can be replaced by the client at any time for any reason, unless the client-settlor is acting under duress of a U.S. court or judge.

Another protection for the Settlor is a Protector who must approve any important changes to the Trust and can replace the Trustee, if necessary. The Client-Settlor maintains a exceedingly high degree of confidence in the safety and management of the Trust’s assets without having legal title to them. Once the Protector declares an end to the event of duress, the Settlor may return the assets to the U.S. or leave them where they are, as some clients are apt to do because of the great sense of security such protection provides. 

As you can see, the key to effective asset protection planning is jurisdictional immunity. It comes from courts in Belize and the Cook Islands that do not recognize legal judgments made in the U.S. Those pursuing your assets housed overseas must re-litigate from scratch their U.S. claim offshore. Cracking an international asset protection trust is exceedingly time consuming and costly. Aside from the costs, the legal processes set a much higher bar to overcome than exist in our U.S. system. The most likely scenario is for creditors to settle disputes under conditions that favor the client.