When I was 4 or 5 years old, it was the early 1970s. My mom, stepdad and I first lived in Los Angeles. Then we moved to Spokane, Washington. Back then, truck stops and local diners always had a “local jackalope“. Even as a 5 year old, I only thought it was kind of funny the first time. So, I’m not sure why businesses carried on with the joke for so long. Apparently, they couldn’t think of anything more creative. This is kind of like the current Asset Protection Hoax in which many lawyers and others are engaging.
At least the businesses all knew it was a joke. And no one got hurt from it (as far as I know).
But there are hundreds of “asset protection attorneys” currently selling “Asset Protection Trusts” (or APTs for short) And there are two camps. One promotes Domestic Asset Protection Trusts (aka DAPTs) that are formed in a state such as Nevada, Alaska, Delaware or South Dakota. The other camp promotes APTs formed in exotic locations such as Nevis or the Cook Islands. These are called Foreign Asset Protection Trusts (or FAPTs).
Here’s the punch line …
They all know that APTs don’t work. Courts continue to rule against APTs (either DAPTs or FAPTs) don’t work. In fact, they are so limited in their effectiveness that I’d compare them to wearing a bulletproof thong and thinking you’re protected in a gun fight. (Sorry for that image.)
DAPTs are only effective if (a) you get sued in the same state in which you formed your trust, and (b) the trust has been in existence for 10 years.
FAPTs are different. They may protect your money. But they will not protect YOU. In other words, a court can find that you violated public policy by transferring money to the foreign country, and then hold you in contempt of court until you bring the money back. (I wonder how many of the asset protection planners tell their clients this.)
And the Asset Protection Hoax doesn’t stop there.
Life insurance agents claim to provide asset protection. When asked, they will say that if you die and owe taxes, the insurance can be used to pay those taxes. Isn’t that just using life insurance to be like … um … life insurance.
And I know of several investment advisors who claim to provide asset protection. In fact, they promise to help you not lose money in your investments. Again, isn’t that what they are supposed to be doing. So aren’t they just being good investment advisors.
I guess I should call myself a Naturopathic Doctor. After all, I help people sleep better at night without prescriptions. I provide proven, effective legal strategies to protect people’s net worth.
What we at Magellan Law don’t provide are “solutions” that don’t work. We also do not pretend to do something other than what we actually do. (We are a law firm and we aren’t pretending to be anything other than that.) We also will never engage in the Great Asset Protection Hoax.