Making Lawsuits Prohibitively Expensive

You can bet it wasn’t a predatory attorney who said, “Money isn’t everything.” Because when it comes to the dysfunctional U.S. tort system, money is what it’s all about. The ugly truth is that your wealth is no longer safe in America.

Certainly not for high-risk professionals in medicine, finance, construction, law, business owners and others that rank among the top targets in a “lawsuit lottery” that is weighed heavily against defendants. That’s why Lodmell & Lodmell, P.C. (L&L) created cost-effective asset protection tools that makes it prohibitively expensive for hungry lawyers with dubious claims to even attempt to take your wealth.

Costs of Predatory Lawsuits

L&L’s approach to asset protection is to make a lawsuit as costly as possible for would-be plaintiffs. In our opinion, DETERRENCE is the most cost-effective way of persuading dubious creditors to walk away from questionable claims or, failing that, to settle disputes for pennies on the dollar. We do this by carefully crafting and integrating powerful legal structures in our asset protection arsenal.

1. These legal tools provide a formidable privacy shield that makes it difficult and costly to obtain the financial information needed to successfully press a claim in court.
2. They also require claimants to re-litigate disputes at great expense – outside the jurisdiction of U.S. courts.

Of course, a determined creditor may pursue a dispute in the trust-friendly Cook Islands, where all L&L prepared trusts are recorded. The chances of prevailing against a well-prepared asset protection trust, drawn and recorded in accordance with the stringent laws of the Cook Islands, are tiny and the probable cost to a creditor in time, hassle and money can be quite substantial.

Costs of Asset Protection Planning

As for the cost of asset protection, the Wall Street Journal says most can expect to pay $30,000 to $50,000 to set up an asset protection trust, plus administrative fees of $3,500 to $7,500 a year. L&L’s fee is substantially less than that – $29,000 for our core asset protection package, plus an annual maintenance fee of $2,100. Included are:

• Asset Management Limited Partnership ™ (AMLP), which affords a certain level of domestic protection for vulnerable assets.
  
• Bridge Trust ®, the ultimate in lawsuit deterrence.

There may be other costs, such as Limited Liability Company (LLC) formation, if needed, plus filing, registration fees and/or tax stamps as required.

At Lodmell & Lodmell, there are three basic stages to asset protection planning.

Establishing The Plan

During this period, L&L customizes the plan and integrates it, if need be, with one or more LLCs, or existing estate planning tools. We will work with your local attorney and CPA as needed. Initial steps include:

• A series of one-on-one client meetings
• Analysis of the client’s financial situation and other circumstances
• Document preparation
• Signing, notarizing and witnessing legal documents
• Funding your plan

Several signed documents are returned to L&L to be recorded and certified by the appropriate U.S. and foreign agencies. Forms are also provided for the client to request tax ID numbers for any LLCs in the plan, after which “funding” occurs. This is the most critical part of the process.

Funding must occur before there is any perceived threat to the assets. That’s when legal title to the assets is transferred to the trust, partnership and LLCs. Clients work with various financial institutions and other local advisors to ensure assets are titled and funded correctly. With each new entity comes a new legal name and for some a tax ID number that, in effect, creates new identities for the assets, legally separating them from the client.

Maintaining the Plan

After the set up and funding are completed, L&L works with the client and CPA throughout the year, responding to any requests and questions that arise. We also conduct annual telephone reviews to assess if changes in the client’s financial, business or family situation warrant adjustments in the asset protection plan. The client keeps the CPA informed of any FLP additions or distributions for year-end reporting purposes on IRS Form 1065, the partnership tax return. Any and all administrative activities for the legal side of things occurring during this stage of the process are covered by L&L’s $2,100 annual fee, regardless of time involved.

Triggering the Plan

To a lawyer, “triggering” means springing the plan into action. Triggering occurs ONLY when a very serious legal threat to the client emerges. Usually, that means a potentially significant lawsuit. The fact is, however, that most clients NEVER experience a triggering event and therefore never incur the costs that ensue when a plan is triggered. The mere existence of an IAPT and the capacity to trigger it often are sufficient to stop dubious lawsuits in their tracks and encourage dispute resolutions on terms far more equitable to the client than would otherwise be the case.

If a serious lawsuit is threatened, L&L gets involved immediately. We discuss the threat with the client and help defense counsel understand how to use the asset protection plan to enhance the client’s position. If a threat is serious enough to trigger the Trust, a one-time fee of $7,500 is paid to L&L for additional documentation and for the interfacing activities the firm engages in until the triggering event is resolved.

The annual fee previously paid to L&L is increased to $3,500, which covers the client-appointed Special Successor Trustee who replaces the client as active manager of the Trust’s assets. The client, however, continues as Investment Advisor for the assets, which typically are moved offshore in accordance with directives previously established by the client. There will, of course, be additional costs for establishing an offshore bank account and some accounting expense for the CPA to file IRS Form 3520 and any other related forms identifying the new foreign trust.

Value of Asset Protection

In a real sense, the value of asset protection planning cannot be accurately gauged – unless the Trust is triggered and tested by a lawsuit. This is unlikely in most cases because of the powerful deterrent effect Asset Protection planning has on dubious creditors. But if you leave your assets vulnerable to the “lawsuit lottery,” you could find out the enormous cost of not having an effective asset protection plan.