Asset protection: why it’s a dirty word!

Posted on April 15, 2009 by Bill Faiferlick

I often hear the terms asset protection, risk management and tax havens interchanged with little regard to some of the key strategic differences between them. They are not for all intent and purposes interchangeable and here’s why.

Asset protection is a great buzz word thrown around to incorporate a wide variety of concepts to protect assets.

The important strategic error is made because asset protection is a component of risk management. In pursuing asset protection strategies for there to be sufficient safeguards, they must be part of the overall risk management plan. Tax havens are often promoted for asset protection benefits. Successfully implementing international strategies requires careful consideration to avoid charges of tax evasion. For Americans, there are filing requirements for international accounts. There are extremely stringent reporting and failure to do so can result in astronomical fines. Positioning assets internationally must be part of an overall risk management plan and carefully orchestrated to afford the intended protection and still remain compliant with U.S. laws.

Let me explain it this way, if you have a business and you do X and your intent was to hide assets from claims against creditors, it is possible given the laws of intent that your “supposed” barrier could be dismantled.

Risk management on the other hand, examines the overall risks to the business/practice or individual from multiple vantage points: compliance with regulatory requirements like OSHA, HIPPA, ERISA, Employee Benefits Security Administration (EBSA) to name a few, professional liability, liability insurance, asset ownership, entity structure formation and selection, internal procedures, and partnership agreements for example. By adopting a multi-tiered plan, risk management affords protection needed by the individual or business to protect not only assets, but also the financial viability of the business.