Asset Protection For Life

I’ve always been a big believer in the concept that life is very simple if you allow it to be. I think the same holds true with Asset Protection. So long as you do a little bit of planning, you can receive a very high level of Asset Protection with very little work.

Here’s an example:

The other day I had a client – just call him M.–give me a call.

It seems he had messed up his taxes for the last few years and was going to owe about four or five hundred thousand dollars to the IRS.

Even though it was a relatively large amount, he had a great attitude about the whole thing. He knew he messed up; he knew he owed it; and he wanted to pay it off, but he wanted to do it under his terms, not the IRS’s.

At that point I inquired as to what, if any, planning he had engaged in before incurring the tax debt. He pretty much said that everything would have to be scrapped and started over from scratch (he bought a fancy package from a guy called Bill Reed) . . . in short, he had no protection.

Now there was a slight twist to his situation. His successful aunt cared a great deal about him and was planning to give him $1.8 million when she passed away. In fact, due to her health, the gift is probably mere months away. The challenge is that when he told her about his issues with the IRS, she became very upset and said she didn’t want to leave anything to him if the IRS was going to just take it away.


Let’s pause for a moment and consider 99% of estate plans, flawed estate plans if you will. It doesn’t matter if someone is using a trust, will, or both, they typically provide that their heirs or beneficiaries will be given assets outright. That is to say that little Johnny and little Susie will get the cash, car or home transferred into their name when Mom and Dad pass away. Sure, Mom and Dad might spread out the inheritance where 50% is given at 18 and 50% given at 35 or some similar plan, but in the end, the kids get the assets outright.

That is just stupid.

Why? Because if Johnny or Susie get a judgment against them, the “judgment creditor” has the same rights in Johnny or Susie’s assets that Johnny and Susie do. If Johnny and Susie own the asset outright and are free to do anything with it, then the judgment creditors enjoy the exact same rights, which means the judgment creditors are going to take away those assets, and there is no protection. If Johnny or Susie owe the IRS money and receive a large inheritance, the IRS can get the inheritance.

Lets get a bit personal and talk about divorce. If you inherit a few million dollars and just so happen to be married to a predatory spouse, what is going to happen in divorce? If instead the money is set up in a trust, how much is the ex-love of your life going to receive?

Let’s go back to M. If his aunt leaves him $1.8 million outright, in hard, cold cash, and the IRS has a lien against him for $500,000, guess who is paid first? Yep, the IRS.

Tim Berry, JD