Asset Protection

For professionals, business owners, and high net worth individuals, the danger in leaving assets unprotected is at an all-time high. Although as assortment of speakers refers to array of “bulletproof” strategies, to protect valuable assets, the truth is no such program exists. The best method for protecting assets may lie in a solid wealth management program with a reputable financial planning group.

Tax-Advantage Investments

The only money you will ever have to spend, lose or invest is what the government allows you to keep. Many taxpayers do not understand that they do have a choice as to whether they will pay a small or large amount of income tax. Why pay the IRS investable funds you are allowed to keep?

Tax advantaged investments are not “loopholes” in the Tax Law that the IRS is out to plug up. They are not immoral, as some would have you believe. A common fallacy is to confuse tax evasion with tax avoidance. Tax evasion is illegal and punishable. Tax avoidance, on the other hand, is legal and is encouraged by the lawmakers. The United States Congress promotes the shifting of funds from the taxable sectors of the economy to areas of public need or good by passing laws which create tax deferred; tax sheltered and even tax free investments.

Many, ignorant of the nature of the tax advantaged investments, would have you believe that you are “robbing” the economy of tax dollars by not giving your taxes to the government to spend in their great wisdom. Such advocates are ignorant of the fact that tax-advantaged investments are put into housing, energy, food, strategic metals, research and development, medical needs and transportation.

Rather than being filtered through bureaucratic mazes to the economy, these otherwise diverted tax dollars are being applied directly to where the need lies – creating new jobs, expanding industry and adding to the growth of the country. The famous jurist, Judge Learned Hand, remarked that, “There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible.”

In another famous quote, Judge Hand wrote: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes” Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).

However, understanding that tax advantaged investments can be and often are risky should be a prerequisite to becoming involved in them. Although there is the possibility of “hitting it rich” with such endeavors, many have and many will continue to chance the loss of their investment. Yet when compared with the alternative, a 100% chance of loss when paying tax, such investments can look quite attractive. After all, which investment will offer the greater possibility of providing you income in your golden years or at any other time?

The taxpayer also needs to remember that Congress has passed tax incentives because such investments are risky. Tax advantages are provided to encourage investing in high-risk areas that provide for the social good of the country.

Being involved with a tax advantage investment requires a proper frame of mind. It is your sleep that will be lost if you are uncomfortable with such an investment. Such investments are complex – particularly with the ever-changing tax laws. Working with a knowledgeable financial planner will help you avoid many of the pitfalls and help you keep more of your hard-earned dollars from taking a one-way trip to the IRS.

Carefully constructed asset protection strategies that are fully implemented early, before any hint of trouble, are much more likely to succeed, and can save you hundreds of thousands, or even millions of dollars. Asset protection has become a significant issue as our lives become increasingly litigious. Both individuals and businesses are at risk of sometimes frivolous claims, so more and more people are ensuring that their assets are well protected. Asset protection strategies generally concentrate on separating assets from risks.


Here are some of our recommendations to consider:

  • Permanent Life Insurance
  • Liability Umbrella Policies
  • Limited Liability Company
  • Family Limited Partnerships
  • Asset Protection Trusts

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice as individual situations will vary. Federal tax laws are complex and subject to change. Neither Lion Street Financial, LLC, nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

Asset protection plans should be developed and implemented well before problems arise. Due to the fraudulent transfer laws, asset transfers that occur close in proximity to the filing of a lawsuit or bankruptcy can be interpreted by the court as a fraudulent transfer. Proper structuring of these assets is imperative please seek proper legal and tax advice prior to engaging in re-titling/structuring of any assets. Please note that laws are subject to change and can have an impact on your asset protection strategy.

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