My website includes a list of common asset protection mistakes- no mistake is bigger than underestimating creditors and their attorneys. Clients and many professionals are too quick to trust their wealth to the theoretical protections promised by various asset protection tools. Professional planners often suggest plans including various asset protection trusts or limited liability companies because on paper these tools protect against creditor collections. No asset protection tool offers perfect protection in the real world, and planners underestimate the creditors’ ability mount arguments against their asset protection devices. Skilled creditor attorneys look for and often find small cracks in asset protections plans which undo the most sophisticated and expensive planning tools.
Because most judges tend to be sympathetic to people owed money and less generous to debtors trying to evade debts even a small mistake or technical deficiency in asset protection planning can lead to judicial destruction. Debtors should not believe planners who tell them that a complicated and expensive planning device offers sure protection. Instead, debtors and planners should learn to think like a creditor. They should spend energy trying to figure out how they might attack their own plan focusing more on the weaknesses of asset protection tools rather than their theoretical benefits. My experience taught me that successful asset protection requires that debtors and planners not believe their own baloney.