on asset protection planning - moses & singerthat of damages, is then asked; specifically, how...

ON ASSET PROTECTION PLANNINGBy: Daniel S. Rubin, J.D., LL.M

Ph: 203-570-2898 // [email protected] // www.familyofficeassociation.org

ON ASSET PROTECTION PLANNING © Daniel S. Rubin, J.D., LL.M.1

INTRODUCTION

For as long as there has been a legal system, there have been two basic questions examined in the context of any civil litigation. The first question is one of liability; specifically, whether the defendant has done anything wrong. If the question of liability is answered in the affirmative, the second question, that of damages, is then asked; specifically, how much the defendant should have to pay to the plaintiff in an attempt to make the plaintiff whole. When these questions are asked and answered appropriately, the result is justice.

Sometimes, however, lawsuits originate and are prosecuted through motives anathema to the actual interests of justice. In such situations, the important questions are not whether the defendant has done anything wrong, or what harm has been occasioned by the defendant’s wrongful conduct. Instead, in such situations the sole question considered is whether a particular individual has the financial ability to pay over substantial sums of money. In fact, most attorneys in the plaintiffs’ bar consider finding such a “deep pocket defendant” to be the single most important consideration when deciding whether or not to commence a lawsuit.

This perversion of justice harms each and every citizen in some manner, big or small. Indeed, Warren E. Burger, the Chief Justice of the Supreme Court of the United States from 1969 to 1986, is often quoted as stating that: “…our society is drowning in litigation…look at the overworked system of justice, the delays in trials, the clogs businessmen face in commerce and a medical profession rendered overcautious for fear of malpractice suits. The litigation explosion, which developed in barely more than a decade beginning in the 1970’s, has affected us at all levels...”. Helpfully, however, the litigation explosion has led to the development in recent years of an area of law designed to counter its effect. This body of law, generally termed “asset protection planning,” involves the application of advance planning, and increasingly sophisticated techniques, to protect against potential future creditor claims.

This paper is intended to develop, for the benefit of a readership consisting of persons who do not hold law or other similar advanced degrees, some of the techniques that individuals of means might commonly apply in connection

1 Daniel S. Rubin is a partner in the New York City law firm of Moses & Singer LLP, where he specializes in sophisti-cated estate and asset protection planning for wealthy individuals and families. He can be reached by telephone at (212) 554-7899 or by e-mail at [email protected].

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with their asset protection planning.

THE PROBLEM OF FRAUDULENT TRANSFER

Every asset protection plan must account, in the very first instance, for the law of fraudulent transfers. In general, the law of fraudulent transfers, which dates back to the enactment of the Statute of Elizabeth in England in 1571, provides that the transfer of assets in anticipation of a creditor problem will be disregarded by the courts and the creditor will be allowed to enforce its judgment against the transferee of the property. And, although minor variations exist, fraudulent transfer statutes can be found under the law of every state and almost all foreign jurisdictions, as well. Accordingly, irrespective of the technique at issue, asset protection planning must be sensitive to avoiding circumstances where the transfer of property may appear to have been made with the intent to “hinder, delay or defraud” either existing or reasonably anticipated future creditors.

Certainly, no effective transfers can be made which would have the effect, after consideration is given to the potential judgment in any pending or threatened litigation, of rendering the transferor insolvent. Moreover, in certain jurisdictions, the mere fact that one has been named as a defendant in a lawsuit can render all transfers made without sufficient return consideration as per se fraudulent transfers irrespective of the transferor’s actual intent in making the transfer. Under all other circumstances, however, the issue remains the transferor’s intent in effecting the transfer, which generally boils down to how close in time the transfer of property was to the subsequent creditor claim. Moreover, it is notable that, except as specified hereinabove, it is unimportant whether or not a creditor’s claim has yet coalesced into a lawsuit (which, of course, might be months or years later).

It is, therefore, absolutely imperative that asset protection planning be undertaken as far in advance of a potential creditor claim as possible in order to ensure that any transfer of property incident to such plan is not later undone as a fraudulent transfer.

TRANSFERS TO (OR IN TRUST FOR) ONE’S SPOUSE

One of the most basic pro-active techniques used in asset protection planning is for an individual who considers himself or herself to be at-risk of potential future creditor claims to simply give money or property to his or her spouse (who hopefully is not also at substantial risk of potential future creditor claims). Colloquially, this technique is known as “poor man’s asset protection

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planning” because it need not involve the assistance of an attorney and, therefore, is usually inexpensive to implement. The protection inherent in this technique lies in the fact that the assets are no longer owned by the at-risk spouse and, therefore, should not be subject to his or her potential future creditors.

As an asset protection technique, the most significant (and fairly obvious) downsides of simply giving money or property to one’s spouse is (i) that it involves giving up control over the transferred money or property, and (ii) that it involves giving up any certainty of enjoying the transferred money or property since enjoyment must now be through one’s spouse. Obviously, the most significant concern here is the possibility (and, tongue-in-cheek, some might even say the “likelihood”), of divorce.

Moreover, for certain individuals, a further issue exists where the transferee spouse is not a United States citizen since the unlimited marital gift tax deduction (which serves to negate any gift tax consequences in connection with the transfer of money or property to one’s spouse), only applies where the transferee spouse is a United States citizen; where the transferee spouse is not a United States citizen, the transferor spouse is limited under current law to transfers of no more than $130,000 per annum unless he or she is prepared to pay a gift tax in connection with the transfer.

Another issue with the transfer of all of the assets of one spouse to the other spouse is the fact that it is extremely inefficient for estate tax purposes. Specifically, unless the first spouse to die has money or property in his or her individual name in an amount at least equal to the estate tax exemption amount, his or her estate tax exemption will be wasted and an unnecessary estate tax will likely result upon the later death of the second spouse to die. Since the federal estate tax exemption is currently $3,500,000, and the maximum federal estate tax rate is currently forty-five percent, if one were to transfer all of one’s assets to one’s spouse and were to then die first, the potential estate tax cost of this asset protection planning technique is an additional $1,575,000 in federal estate taxes (and, potentially, an additional amount due for state estate tax, as well). And, of course, no matter what the probability that one might be named as a defendant in a lawsuit, and ultimately lose that lawsuit, death is and always has been the one ultimate certainty.

An asset protection planning alternative that protects both against the possibility of one wasting one’s estate tax exemption, while at the same time protecting against the loss of the transferred money or property in the event

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of divorce, is the use of a trust in connection with any inter-spousal transfers. Through the expedient of a trust, one could transfer money or property to a close friend or family member as trustee to hold the money or property for the benefit of one’s spouse. For so long as the marriage is a good marriage, the transferor would have indirect access to the transferred money or prop-erty through the possibility of a trust distribution to his or her spouse for their mutual benefit. And, by reason of a “floating spouse” clause, which defines one’s spouse as being the person to whom one is married at the time refer-ence is made, a divorce would have the effect of removing one’s ex-spouse, and adding one’s new spouse, as a beneficiary of the trust. In addition, a care-fully drafted trust employing a so-called “decanting” clause or, alternatively, a “revisions of interest” power in the friendly (albeit technically disinterested) trustee, could provide for the transferor spouse to regain access to the money or property previously transferred in trust (if, for example, there is no new spouse through which the transferor can once again enjoy the benefits of the trust property).

A trust of this sort can also provide a potential estate planning benefit since the transferred money or property, together with any appreciation thereon, need not be taxed upon the death of either spouse assuming that the trust is properly drafted. Since the transferred money or property will double in value every ten year, assuming a seven percent return, this can be a significant ben-efit if the trust is established as early as possible in life. From an asset protec-tion planning perspective, a trust created with an estate tax planning benefit is also a more effective asset protection planning vehicle since a potential future creditor would be less likely to be able to successfully argue that the funding of the trust was engendered with an intent to hinder, delay or defraud creditors, and thus should be undone by the courts as involving a fraudulent transfer.

Significantly, lifetime transfers by gift, including in connection with the fund-ing of such a trust as is described above, are limited to $1,000,000 unless the transferor is prepared to pay a current gift tax or engage in leveraging tech-niques which might later be found by the Internal Revenue Service to have been overly aggressive tax planning (generally depending upon the extent of the leverage). Therefore, for truly wealthy clients with significant asset protection concerns, such a trust is rarely the sole asset protection technique employed.

EXEMPTION PLANNING

Although public policy favors the enforcement of creditors’ claims generally,

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the undeniable importance of certain assets to what might be termed the “subsistence” of a debtor and his or her family will often trump the enforcement of creditors’ claims. Such assets are frequently referred to as “exempt” assets. While some exempt assets (i.e., the family bible), have no asset protection utility, other exempt assets provide potentially significant asset protection planning opportunities which should be considered in connection with one’s asset protection plan. As a preliminary matter, however, it must be noted that the question of an asset’s status as exempt or non-exempt, and the extent of the exemption, varies significantly between states. Therefore, one must look to local law to determine the particulars of any exemptions likely applicable to one’s specific situation.

One asset that is frequently granted an exemption from creditors’ claims is an individual’s principal residence. This exemption is most often referred to as a “homestead exemption”. The fairly obvious legislative purpose behind the enactment of a statutory homestead exemption is the preservation of that asset most necessary for the subsistence of an individual and his or her dependents – their home. In fact, so significant is the family homestead deemed to be to one’s subsistence that forty-seven of the fifty states provide at least some level of exemption for an individual’s principal residence. Unfortunately, however, only Florida, Iowa, Kansas, South Dakota and Texas provide for a so-called “unlimited” homestead exemption. And, even where the homestead exemption is unlimited, this does not necessarily also mean that the exemption is unqualified – for example, certain specially protected classes of creditors (i.e., the Internal Revenue Service or an ex-spouse), might be permitted to avoid this exemption and enforce a judgment against the home.

In order to maximize use of the homestead exemption, one might consider moving, subject to the time requirement of the Bankruptcy Code for establishing residency in that jurisdiction, to a jurisdiction that allows a more generous or even an unlimited homestead exemption. Alternatively, where one is already domiciled in such a jurisdiction, or even where one wants to make the best use of the limited homestead exemption available in one’s current jurisdiction, one might pay down one’s mortgage, improve one’s home, or purchase a larger, more expensive home, in furtherance of one’s asset protection plan.

Another potentially significant exemption often attaches to life insurance (including the cash value that might exist within a permanent life insurance policy), and/or annuity contracts. Again, the protection depends upon state law, which varies significantly amongst states, with the law of some states

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wholly exempting the contract, irrespective of value, and the law of other states severely limiting the exemption (for example, sometimes to that amount necessary for the support of the individual and/or the his or her dependents). Where one resides in a state with a generous exemption for life insurance or annuities, one might consider investing in such assets (and, in particular, private placement type “variable” life insurance or annuity contracts, which most closely resemble a direct investment in the stock market, in hedge funds, in private equity funds, and the like), in lieu of a less protected or, more likely a wholly unprotected, form of investment.

A final, but very important, exemption applies under federal law, as well as the debtor-creditor law of many states, to qualified retirement plans (meaning plans that qualify under the Employee Retirement Income Security Act (“ERISA”) of 1974), and individual retirement accounts. One should, therefore, consider funding one’s qualified plan and individual retirement accounts to the fullest extent permitted under the tax law even where the funding is not tax deductible.

LIMITED PARTNERSHIPS (AND LIMITED LIABILITY COMPANIES)

Another common asset protection planning technique involves transferring money and/or other property to a limited partnership or limited liability company as a capital contribution thereto in exchange for an interest as a limited partner or non-managing member. Ownership of the controlling interest in the limited partnership (i.e., the general partner interest), or the identity of the manager or managing member in a limited liability company, varies but often the individual utilizing the limited partnership or limited liability company for asset protection purposes will attempt to retain some direct or indirect control over the structure.

The asset protection afforded by the limited partnership or limited liability company structure is based upon what is commonly known as a “charging order” protection. Specifically, under the law of every state it is arguably the case that if the limited partner or limited liability company member is successfully sued his or her creditor would only be entitled to a lien on the limited partnership inter¬est or limited liability company membership interest, and would not be entitled to enforce its claim directly against the underlying assets of the limited partnership or limited liability company. It is further argued that neither does the creditor’s charging order entitle the creditor to become a limited partner in the limited partnership, or a member in the limited liability company, entitle the creditor to vote on limited partnership or limited liability company matters, entitle the creditor to inspect or copy

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limited partnership or limited liability company records, or entitle the creditor to obtain the business and tax information of the limited partnership or limited liability company (which is usually available to limited partners and limited liability company members as a matter of law). In fact, the sole entitlement of a creditor with a charging order is, arguably, the right to receive the distributions that are allocable to the debtor limited partner from the limited partnership, or the debtor member from the limited liability company, if and when distributions might be made.

Of course, the creditor’s “remedy” of being able to receive distributions from the limited partnership or limited liability company if and when distributions might be made may ultimately prove hollow to the creditor since it might reasonably be expected that the general partner of a limited partnership, or the manager or managing member of a limited liability company, will make no distributions while a charging order is outstanding. And, of course, a limited partnership agreement or limited liability company agreement drafted for asset protection purposes would provide the general partner, manager or managing member with broad discretion to make, or to refrain from making, distributions from the limited partnership or limited liability company.

Under the tax law there is also some authority to the effect that the taxable income of the limited partnership or limited liability company will be chargeable to the creditor who has obtained a charging order notwithstanding the fact that no distributions may ever actually be made to the creditor. Therefore, the effect of a charging order might be that the creditor will be forced to realize “phantom” income on which the creditor would have to pay income tax on a current basis.

In sum, although a charging order would provide the creditor with a remedy, it would likely prove unsatisfying (and perhaps even painful), to the creditor. It might, therefore, be expected that the limitations inherent in the charging order as a creditor remedy would provide the debtor with leverage to force a settlement of the creditor’s judgment on terms generally considered favorable to the debtor.

Unfortunately, however, most of the foregoing analysis as to the asset protection consequences of the ownership of one’s assets through a limited partnership or limited liability company is speculative since it remains almost entirely untested in the courts. Most significantly, there is substantial uncertainty in most states as to whether or not the courts will consider a charging order as the sole and exclusive remedy available to a creditor. Equally likely is the prospect that a court will consider a charging order as

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merely one permissible remedy out of many permissible creditors’ remedies (including, perhaps, a foreclosure upon the underlying assets of the limited partnership or limited liability company). Even where the charging order might be held to be an exclusive remedy to the creditor, however, a sale of the limited partnership interest or limited liability company membership interest may still be allowed where the creditor can demonstrate to the court that monies that might be collected pursuant to the charging order (if in fact, any are ever collected), will likely be insufficient to satisfy the creditor’s judgment in a reasonably timely manner.

Alternatively, it might be argued by the creditor that the limited partnership or limited liability company should be deemed to be an “alter ego” of the debtor. Such an argument might be made, for example, where (i) the limited partnership or limited liability company lacks any real business purpose, (ii) the limited partnership or limited liability company is funded with an excess of personal use assets, (iii) there has been a pattern of non-adherence to the legal formalities attendant to the limited partnership form or limited liability company form, and/or (iv) the interests of the other limited partners or limited liability company members in the limited partnership or limited liability company are inconsequential relative to the debtor’s limited partnership or limited liability company interest.

There is even substantial doubt as to whether the creditor will, in fact, actually be charged under the tax law with phantom income by reason of the charging order. In fact, it is at least as likely that, notwithstanding the charging order, the limited partner or limited liability company member will be liable to report the income of the limited partnership or limited liability company on his or her own return, perhaps with the tax paid on such phantom income deemed to reduce the judgment debt to the charging order creditor. Even if phantom income were realized by the charging order judgment creditor, all of the remaining non-debtor partners would at the same time also be realizing phantom income with respect to their own limited partnership or limited liability company interests and, therefore, they might force a distribution to be made, thereby negating any leverage that the debtor might otherwise have viz a viz his or her creditor.

“ASSET PROTECTION” TRUSTS

It is a well settled tenet of trust law that one person (the “settlor”) may place property in trust for the benefit of another person (the “beneficiary”), and include a so-called “spendthrift” clause in the trust agreement in order to effectively preclude the beneficiary’s present and future creditors from

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merely one permissible remedy out of many permissible creditors’ remedies (including, perhaps, a foreclosure upon the underlying assets of the limited partnership or limited liability company). Even where the charging order might be held to be an exclusive remedy to the creditor, however, a sale of the limited partnership interest or limited liability company membership interest may still be allowed where the creditor can demonstrate to the court that monies that might be collected pursuant to the charging order (if in fact, any are ever collected), will likely be insufficient to satisfy the creditor’s judgment in a reasonably timely manner.

Alternatively, it might be argued by the creditor that the limited partnership or limited liability company should be deemed to be an “alter ego” of the debtor. Such an argument might be made, for example, where (i) the limited partnership or limited liability company lacks any real business purpose, (ii) the limited partnership or limited liability company is funded with an excess of personal use assets, (iii) there has been a pattern of non-adherence to the legal formalities attendant to the limited partnership form or limited liability company form, and/or (iv) the interests of the other limited partners or limited liability company members in the limited partnership or limited liability company are inconsequential relative to the debtor’s limited partnership or limited liability company interest.

There is even substantial doubt as to whether the creditor will, in fact, actually be charged under the tax law with phantom income by reason of the charging order. In fact, it is at least as likely that, notwithstanding the charging order, the limited partner or limited liability company member will be liable to report the income of the limited partnership or limited liability company on his or her own return, perhaps with the tax paid on such phantom income deemed to reduce the judgment debt to the charging order creditor. Even if phantom income were realized by the charging order judgment creditor, all of the remaining non-debtor partners would at the same time also be realizing phantom income with respect to their own limited partnership or limited liability company interests and, therefore, they might force a distribution to be made, thereby negating any leverage that the debtor might otherwise have viz a viz his or her creditor.

“ASSET PROTECTION” TRUSTS

It is a well settled tenet of trust law that one person (the “settlor”) may place property in trust for the benefit of another person (the “beneficiary”), and include a so-called “spendthrift” clause in the trust agreement in order to effectively preclude the beneficiary’s present and future creditors from

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accessing the trust property in satisfaction of their claims against the beneficiary. Thus, for example, as part of one’s estate planning one might provide for his or her children’s inheritance to pass to them in trust, rather than outright, in order to protect the inherited property from the claims of the children’s present or future creditors (even including, perhaps most importantly, the claims of a child’s spouse for equitable distribution, or even spousal support, in the event of divorce).

Unfortunately, in most jurisdictions it is also well settled law that where a person establishes a spendthrift trust for his or her own benefit (a so-called “self-settled” spendthrift trust), public policy deems the trust void as against the settlor-beneficiary’s creditors. The theory is that it would be unfair for a person to retain the potential use and enjoyment of his or her assets while at the same time leaving his or her creditors’ claims unsatisfied through the expedient of a self-settled spendthrift trust. Interestingly, this remains the case (i) even where the settlor-beneficiary is but one member of a large class of potential beneficiaries, (ii) even where the settlor-beneficiary never actually receives a distribution of property from the trust, and (iii) even where the trustee is a large bank or corporate trust company over which the settlor-beneficiary has no control, or perhaps even any influence, in connection with the making of a distribution. A few jurisdictions, however, do hold self-settled spendthrift trusts effective against creditor claims provided, however, that the creditor claims are not yet accrued as of the date the trust is established. Self-settled spendthrift trusts created under the law of such jurisdictions are frequently called “asset protection” trusts for obvious reasons. Although asset protection trusts are sometimes also structured to garner an estate tax benefit, for various reasons such trusts are most often created purely for asset protection purposes, and are, therefore, structured to be entirely income, gift and estate tax neutral; neither costing nor saving even a penny of tax. Often the most compelling reason for establishing an asset protection trust as a purely tax neutral device is to remove the dollar limitation in connection with the funding of the trust without imposition of gift tax. Thus, a properly structured trust, created solely for asset protection purposes, can be funded with any amount of money or property – not just $1,000,000 – without gift tax consequences.

For over a decade, every one of the limited number of jurisdictions that allowed asset protection trusts was located offshore, but in recent years ten U.S. states have revised their trust law to allow self-settled spendthrift trusts (to wit; Alaska, Delaware, Missouri, Nevada, New Hampshire, Rhode Island, South Dakota, Tennessee, Utah and Wyoming now allow asset protection

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trusts to be created under their statutory law). An eleventh state (being Oklahoma), has a variation on the standard asset protection trust statutory law which provides a similar protective effect. In addition, there remain approximately twice as many foreign jurisdictions which also have asset protection trust law.

It is important to note that whether or not one actually resides in an asset protection trust jurisdiction is irrelevant. Although one’s home state may not permit asset protection trusts to be created under its own trust law, the law of every state permits its residents to create trusts governed under the law of any other jurisdiction, including a foreign jurisdiction. Moreover, with very limited exceptions, the law of every state provides that respect shall be afforded to such trusts, even though the application of the other jurisdiction’s trust law may be contrary to the law of the settlor’s home state.

Although asset protection trusts can be established either onshore or offshore, due to certain complex issues engendered under the Full Faith and Credit Clause of the United States Constitution, asset protection trusts established in offshore jurisdictions have the potential to be more protective than asset protection trusts established under the law of one of the U.S. states. Therefore, asset protection trusts established in offshore jurisdictions remain more common than domestic asset protection trusts.

Asset protection trusts established in offshore jurisdictions are sometimes generically referred to as “offshore trusts” or, more specifically, as “offshore asset protection trusts” or “foreign asset protection trusts”. The use of the terms “offshore” and “foreign” are, however, somewhat misleading since although the written agreement establishing the trust must state that it is governed by the law of the foreign jurisdiction, and at least one trustee of the trust must be located in the foreign jurisdiction in order to have the law of such foreign jurisdiction apply to such trust, the money and/or other property that is used to fund the trust can actually remain invested within the United States. However, for the foreign asset protection trust to be more protective than its domestic counterparts, as can be the case, as noted above, the trust fund must actually be located offshore (for example, through an offshore bank as custodian), although for various reasons it is often desirable for management of the trust fund to be kept with a money manager based in the United States.

Additional trustees, beyond the requisite foreign trustee, might be named in order to ensure that the trust’s affairs are under the control of the settlor’s friends, family members or professional advisors, as trustees, rather than

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under the control of the foreign trustee. An additional friend, family member or professional advisor, or even the settlor himself or herself, might also be named as the “protector” of the trust, with the authority (i) to veto any substantial trust decisions that might not be to his or her liking, and (ii) to remove and replace trustees, at his or her discretion. Moreover, with a domestic co-trustee and a domestic protector, and assuming that the trust agreement is drafted to garner this result, a “foreign” asset protection trust can be structured as foreign for trust law purposes, yet purely and unequivocally domestic for tax law purposes (thus avoiding certain additional information reporting discussed further herein below).

Where continuing direct control over the money and/or other property transferred into the trust is crucial to the settlor, the trust can be combined with a limited partnership in which the settlor owns a one percent interest as the general partner and the trust owns a ninety-nine percent interest as the limited partner, or a limited liability company in which the settlor is the sole manager and the trust is the sole member. If the trust only holds a limited partner’s interest in the limited partnership or a non-managing membership interest in the limited liability company, the trustee will have no day-to-day authority over the transferred assets. Instead, the general partner or manager will maintain day-to-day control over the investments of the limited partnership or limited liability company until such time as an actual transfer offshore of the assets of the limited partnership or limited liability company may be deemed as being warranted due to a more imminent threat.

Obviously, significant structural variations exist between one individual’s asset protection trust and another individual’s asset protection trust, as the exact structure of any particular trust is, of course, determined by the settlor upon the advice of his or her attorney. One should be strongly cautioned, however, that the greater the level of retained control, or even of perceived control, the less likely a court will be to respect the trust in the context of a sustained challenge by a determined creditor. In fact, the most assuredly protective structure consists of a foreign asset protection trust, with only the single foreign corporate trustee, and a foreign corporate protector, and with the trust’s assets in the custody of an offshore bank as custodian. Moreover, even though the essence of an asset protection trust is the fact that the settlor is a permissible discretionary beneficiary, the settlor would ideally live off of his or her continuing earned income or non-trust assets, rather than regularly requesting discretionary distributions from the trustee of the asset protection trust so as to avoid any suggestion of control over the trustee.

When the settlor’s asset protection concerns diminish (perhaps because the

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settlor has retired and his or her asset protection risk concerns had related almost entirely to business or professional risk), the trust might be terminated in favor of the settlor since the asset protection trust will have then served out its purpose. Alternatively, the asset protection trust might be continued, even absent any obvious asset protection concerns, because the asset protection trust can also be used as a substitute last will and testament for the settlor, to pass on his or her wealth in a tax efficient manner at death.

CONCLUSION

By definition, “planning” involves thinking out one’s acts and purposes, or structuring one’s affairs, prior to the occurrence of a particular event. And, asset protection planning, constrained as it is by the law of fraudulent transfers, requires action in advance of any potential future creditor claim – and, ideally as far in advance of any potential future creditor claim as possible.

It is, of course, natural and understandable not to think about the need to protect one’s assets until after a lawsuit is commenced or a claim accrues. It is not, however, planning and most importantly, it is not effective. Therefore, whether one’s asset protection plan involves, at one extreme, a simple transfer of money or property to one’s spouse or, at the other extreme, involves the creation of an offshore asset protection trust, the planning should be placed on today’s agenda – not tomorrow’s agenda. IRS CIRCULAR 230 DISCLOSURE

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained herein (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

FOA Newsletter Guest ColumnistDaniel S. Rubin, J.D., LL.M

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any investment in particular, nor should it be construed as a recommenda-tion to purchase or sell a security, including futures contracts.

This document is not an invitation to subscribe for shares in any fund and is intended for informational purposes only. Hedge funds and other alternative investments are speculative investments and are not suitable for all investors, nor do they represent a complete investment program. The funds are only open to qualified investors who are comfort-able with the substantial risks associated with investing in alternative investments.

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