ASSET PROTECTION & RISK MANAGEMENT

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Asset Protection (sometimes also referred to as debtor-creditor law) is a set of legal techniques and a body of statutory and common law dealing with protecting assets of individuals and business entities from civil money judgments. The goal of all asset protection planning is to insulate assets from claims of creditors without concealment or tax evasion.

One of the tools that can be used in meeting these objectives are called Family business entities. They might be operating companies or simply entities through which families consolidate management of investments. They might be in the form of a corporation, limited liability company, limited partnership, etc.

Another common tool used for asset protection is a trust. A trust is a vehicle for holding individual's assets to shield them from creditors. Asset protection trusts allow, if it is difficult for a creditor to seize assets, settle with the debtor on favorable terms instead of engaging in costly litigation. This vehicle has complex regulatory requirements, such as being irrevocable and contains a spendthrift clause. An asset protection trust does provide for occasional distributions, but those distributions must only occur at an independent trustee's discretion.

In the US, only a few states allow asset protection trusts. As of 2012, these include Alaska, Delaware, Rhode Island, Nevada and South Dakota. However, one can establish an asset protection trust in these states without residing there. Offshore financial centers like the Cook Islands and Nevis also allow individuals to establish asset protection trusts. The trust's documents and administration, along with some or all of the trust's assets, must be located in the same jurisdiction where the trust was established.

One of the soundest instruments for international asset protection are insurance products from Switzerland. This is because of powerful provisions in the Swiss insurance law. Where else but in Switzerland could one find the ideal vehicle for protecting assets? In Swiss law, annuity and life insurance policies are fully protected and cannot be included in any bankruptcy procedure or seized by any creditors. Even if a foreign court should specifically order the seizure of a Swiss annuity account or its inclusion in a bankruptcy estate, the insurance policy will not be seized by the Swiss authorities, provided that it has been structured the right way. There are, essentially, three requirements:

1. A person who buys a Swiss life insurance policy must designate as beneficiaries his or her spouse or descendants, or a third party (if done so irrevocably). If the policyholder has designated his spouse or his children as beneficiaries of the insurance policy, the policy is protected regardless of whether the designation is revocable or irrevocable.

2. To avoid suspicion of making a fraudulent conveyance, the person must have purchased the policy or designated the beneficiaries not less than one year (in some cases five years) before any bankruptcy decree or collection proceedings are initiated.

3. The insurance policy is deposited in Switzerland.

A properly structured Swiss insurance policy is a viable and sound alternative to offshore trusts.

In fact, Swiss insurance policies are probably the soundest, smartest and most economical asset protection and estate planning facility in the world, providing you with the strength, security and reliability of the Swiss legal system.

While the basis of a trust is the transfer of ownership to a trustee, a holder of a Swiss insurance policy is the owner and retains full control so long as he or she remains solvent. This also means the owner can liquidate their investment at any time.

A properly arranged Swiss insurance policy provides many benefits without the costs and drawbacks of dealing with more complicated structures.