Step 1 - your assets Step 2 - levels of protection Step 3 - timing

Your Assets

Your AssetsThere is no one "silver bullet" in asset protection. The term "asset protection" encompasses a number of planning and structuring mechanisms that may be implemented by a practitioner to minimize a client's exposure to risk. For each client the asset protection solution will be different, depending on (i) the identity of the debtor; (ii) the nature of the claim; (iii) the identity of the creditor; and (iv) the nature of the assets. These are four threshold factors that are either expressly or implicitly analyzed in each asset protection case. The analysis of these four factors determines what planning would be possible and effective for a specific client.

To learn how to protect your specific assets, explore the links below.


What do you want to protect?

Click to expand Your Home

Protecting Your Home

For many people, their home is their single most valuable asset. It can also be their most vulnerable. The financial and emotional impact of losing it can be devastating. At Klueger & Stein, LLP we utilize perfectly legal and ethical strategies to avoid such a loss.

A Case History: The Unfortunate Widow

Dolores was 84 and a widow. She had been living in the same house for 30 years, and it was fully paid off. She had virtually no savings, and lived off her Social Security benefits.

She was involved in an automobile accident and was sued. The plaintiff asked for $200,000 in excess of her insurance coverage. She was in danger of losing her home.

Representing the woman on a pro bono basis, we transferred the ownership of her house to a special residence trust. Seeing this, the plaintiff ceased its efforts to pursue our client in excess of her insurance limits.

While Dolores is not a typical asset protection client, her case is an excellent example of an important point- you do not need to be uber-rich, or rich at all, to engage in asset protection planning. We all have assets worth protecting. Whether your home equity is $200,000 or $2,000,000, the emotional attachment and the need to protect it is the same.

Click to expand Your Business

Protecting Your Business

Any business is exposed to lawsuits. Partners, terminated employees, dissatisfied customers, unhappy vendors all can have you in their sights. The fact that you're not negligent or haven't acted improperly doesn't guarantee that you won't be sued, or if you are sued, that you'll win the case. Juries often side with individuals in cases against a business, as they see it as a small cost to the company.

Klueger & Stein's inventory of strategies to protect your business include incorporation, limited liability companies, estate planning and various types of trusts. With our broad experience, we custom-design the strategy that fits your business and circumstance best.

A Case History: Building Protection

The company is a successful California-based homebuilder. Over the past few years, following many construction defect lawsuits, the firm found it more and more difficult to carry liability insurance. Coverage was just too expensive. Eventually, the decision was made to stop carrying insurance coverage altogether.

Without insurance coverage, the company-and possibly its owners-was exposed to future lawsuits. Asset protection for the company and its owners was the best alternative to insurance coverage.

The company's operations had to be restructured so that the liability arising out of any one building project would reach only a limited amount of the company's assets, if any. A separate legal entity was established for each construction project. Their protection was enhanced further by having different entities own the real estate and do the development work.

An additional layer of entities further insulated the individual owners from the liabilities of the business. The ownership of the personal assets of the owners was further restructured.

In its first test, this protective structuring worked as planned-seeing the level of protection it faced, the plaintiff dropped a potential class action lawsuit and accepted a surprisingly low settlement offer.

Click to expand Financial Investments

Protecting Your Financial Investments

Your investments are your future. But years of careful financial planning and asset-building can fall to pieces without proper protection. Complex legal systems that create confusion make planning vital. Our knowledge of those complexities can save you years of frustration and pain. Designing protection for your investments now can mean a more peaceful and secure future.

A Case History: In the Wake of Enron

The board member of a publicly traded company found just how dramatically the Sarbanes-Oxley law and the events of Enron have changed the business world. Even though his company was being cleanly run, with the new business environment he was concerned that he was still exposed to significant personal risk.

Because there was no way to insulate him from personal liability under Sarbanes-Oxley, the focus of our planning was on protecting his assets, principally his family home and an investment account.

His family had been residing in their house for the past ninety years and the prospect of losing it was unbearable. The first step in our protection planning was to transfer ownership of the home to his wife as her sole and separate property. She then contributed the home to an irrevocable trust. This structure afforded an insurmountable level of protection for liabilities directed against him, and even provided a significant level of protection against any liabilities that his wife could face.

To protect his investment account, we showed him two primary options: transfer the ownership of the account to either a limited liability company or to a foreign trust. To maximize the protection of the account, he opted to transfer the ownership to an irrevocable trust governed by the laws of New Zealand.

Click to expand Real Estate Investments

Protecting Your Real Estate Investments

A Case History: Saying No To Greedy Plaintiffs

Mr. Soto is a real estate builder and developer. He completed a 60-house development in Northern California in 2005 and quickly sold off all of the homes at a handsome profit. Having been a developer and a builder for many years, he understood his liability exposure. Under California law, he could be pursued for a period of 10 years for any construction defect, real or alleged. Mr. Soto wished to insulate himself and his family from any potential future lawsuit with respect to this development. His asset protection planning involved a two-step process.

First, pursuant to a transmutation agreement, some of the assets were transferred to Mrs. Soto, as her sole and separate property. The assets transferred to Mrs. Soto included the couple's personal residence and two apartment buildings. Mr. Soto retained the ownership of the building-development company, and a significant amount of cash. Following this split of the assets, in the event of a lawsuit against Mr. Soto, the residence and the apartment buildings would no longer be reachable by Mr. Soto's creditors. He longer owned these assets, they were now owned by Mrs. Soto.

Second, all of the assets were placed into special protective structures to create a second level of obstacles for a prospective plaintiff. Mrs. Soto transferred the ownership of the residence to a special residence trust. The apartment buildings were transferred into a limited liability company. Mr. Soto transferred his significant liquid assets into an offshore trust-LLC structure.

As a result, a creditor wishing to pursue the equity in the Sotos' residence would now need to attempt to break through the transmutation agreement, and then through the residence trust. We have implemented hundreds of these structures and find them to be an effective shield against creditors over 99% of the time.

A Case History: The Aspiring Donald Trump

Jonathan was in his early 40s and a successful physician. One of his investments included a 10-unit apartment building. He was concerned about a creditor attack against the apartment building in the event of a lawsuit. We transferred the ownership of the apartment building into a limited partnership with a limited liability company acting as the general partner. For tax purposes both the limited liability company and the limited partnership were treated as disregarded entities, with no federal tax return filing requirements. Because Jonathan no longer owned the apartment building, a creditor could no longer reach it. Jonathan now owned interests in the limited partnership and the limited liability company, but both were protected by the charging order limitation. All our research and practical experience allow us to conclude that the charging order protection is an extremely powerful tool and very rarely tested by creditors.

A Case History: A California Mogul

Mr. Johnson is a well-known California real estate developer, builder and investor. He owns over one hundred separate real properties, primarily in California. While the overall structure we devised was fairly complex, we used a Delaware series limited liability company as the umbrella entity. A series LLC allows one to compartmentalize liabilities within one LLC. This significantly cuts down on franchise taxes, legal fees and accounting fees. Mr. Johnson was able to reduce his annual California franchise taxes from approximately $80,000, to $800.

If you are looking for a more detailed explanation of asset protection, with the full substantive legal foundation, visit
Klueger & Stein, LLP
16000 Ventura Boulevard
Suite 1000
Encino, California 91436

Phone: (818) 933-3838
Fax: (818) 933-3839
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