Nevada is perhaps the best state in America at devising ways to separate you from your hard-earned dough. As Jack Yelton observed, “There is a very easy way to return from a casino with a small fortune: go there with a large one.” Luckily, however, other than the good advice to be wise with your gambling expenditures, there are several ways to protect your nest egg from the difficulties and challenges of life.
First, and most important, don’t break the law or try to avoid your lawfully owed taxes. Tax crimes and penalties are some of the most difficult charges to avoid or overcome. Remember, Al Capone—the notorious gangster—got away with everything except tax evasion. Additionally, Courts have broad powers to set aside fraudulent transfers, impose penalties, and could potentially even send someone to jail for illegally avoiding creditors.
Second, avoid a “one size fits all” solution. Prepackaged asset protection tools are usually a mistake. Everyone’s situation is unique and the right plan must be customized to the individual’s objectives and circumstances. What works well for one person could do more harm than good for another. This means that you’re going to have to do some work, but it also means you’ll know exactly what your asset protection strategy is and that it’s right for you.
Third, start as early as possible. To be effective, steps to legally protect assets should be taken before the liability ever arises. You can’t disarm a bomb after it has already gone off. Attempting it in the context of asset protection can make a bad situation even worse. Remember, it’s too late to buy insurance once the house has burned down.
Fourth, speaking of insurance, don’t use asset protection as a substitute for insurance. In most cases, your first line of defense should be insurance. Only if, or to the extent that, the liability is not covered by insurance should the earlier taken asset protection steps come into play.
Fifth, don’t mix personal and business. If you do business under a limited liability company or corporation, your assets enjoy the protection of the corporate veil. One way you can weaken or destroy that veil is by commingling personal and business interests. Never pay personal expenses out of your business account; never pay business expenses out of your personal account; never deposit business income directly into your personal account.
Finally, don’t overcomplicate it. Some of the best asset protection plans are simple. For example, A Nevada asset protection trust, limited liability company, homestead exemption, or a combination of each these may be all that you need in your situation. Each can be a powerful asset protection tool when used sensibly and when set up timely.
In the end, when the circumstances warrant and when done properly, asset protection is wisdom. Those who take it on should keep these principles in mind.
Clifford Gravett is an attorney with Bingham Snow & Caldwell. He is licensed to practice in Nevada, Arizona, and Utah. He can be reached at (702) 346-7300, firstname.lastname@example.org, or 840 Pinnacle Court, Suite 202 in Mesquite.