How NOT to Protect Your Assets

Like many others my age, it amazes me how fast the years have gone.

Why do I mention that? In part because of a recent survey by The American Institute of CPAs (AICPA). As a part of financial literacy month, they spoke with over 1,000 adults.

Among the results: “The survey found that only 46 percent of non-retired Americans are confident they will reach their retirement goals, compared with 49 percent who are not confident (29 percent not sure, 20 percent don’t think they ever will). Only five percent of non-retired Americans reported that they had already reached their retirement goals.”
How NOT to Protect Your Assets
   A number of years ago in a previous marriage I made the mistake of signing over a jointly held home and other real estate to a wife I ultimately divorced.  At the time my legal advisor thought it a prudent move so I could avoid the burdensome cost of “errors and omissions” insurance, something publishers carry in the event of a lawsuit.
At the time I owned several newspapers, newsletters, business shows and other related intellectual properties.  I also carried a personal excess liability or umbrella policy for a million dollars and kept all business in the corporate name for added protection because as we all know too well… the motto in the United States is “When in Doubt-Sue.”
Of course, when I divorced my wife, her attorney successfully argued I was no longer entitled to any portion of the real estate assets so I lost over $350,000 in cash and assets in the process.  [I lost another $250k that year selling my business to a partner who never paid me.  He later went bankrupt which prevented me from ever collecting anything other than a paltry $30,000].
So the number one lesson to be learned is:
Trusting people who aren’t worthy of your trust isn’t the only stupid asset protection trick I’ve encountered. Here are a few that I’ve encountered over the years:

  1. Putting your money in your spouse’s name. In some states, this strategy can be effective in protecting your assets, but there are numerous drawbacks.
The most obvious one is divorce. If your spouse decides one day to leave for greener pastures, those assets could be gone for good.
There’s also the concept of “fraudulent transfer” (also called “fraudulent conveyance”). In a lawsuit, courts carefully examine asset transfers between relatives, especially if they occur when litigation is imminent or has already started. A court has the authority to order your spouse or anyone to whom you’ve made an apparent gift to return it.
And what happens if your spouse gets sued? This occurred with one of my clients, a surgeon who paid malpractice premiums of hundreds of thousands of dollars annually. For extra protection (he thought), he transferred most of his wealth to his wife.
It didn’t work. One day, while driving home from the country club after a few cocktails, the wife hit a teenager on a bicycle, badly injuring him. The family sued, and the claim exceeded the limits of her liability insurance. (We had recommended hiking these limits as well, but my client hadn’t gotten around to it.) She wound up writing a $1 million check to the boy’s parents out of my client’s assets.


  1. Not making full disclosure in a bankruptcy case. If you file for bankruptcy or are forced into it, the payoff is that a court will discharge, or at least restructure, your debts. But before it does so, you must make a full disclosure of your financial condition.
How will anyone know if you don’t? There are many “breadcrumbs” an experienced bankruptcy trustee can follow: your tax returns, property records, and (especially) disgruntled business partners, ex-spouses, etc.
Former baseball star Lenny Dykstra learned this the hard way. He failed to disclose some items worth more than $200,000, including a collection of baseball memorabilia, on a bankruptcy petition. He served more than a year in prison as a result.


  1. Creating a “constitutional trust.” Also known as a “pure trust,” “colato,” or a “common law trust,” a better name for it would be “con-man trust.” Promoters claim this instrument will be completely exempt from all taxes. And they’re right – the trust won’t owe any tax, because the IRS doesn’t recognize it as a legitimate legal entity. Instead, you owe the tax, and if you don’t pay it, the IRS will be happy to collect it from you.
Recently, a husband and wife we know lost pretty much everything they owned because the wife over-medicated herself with prescription drugs and then became involved in a car accident and got sued.  Unbeknownst to the husband, she had failed to pay their automobile insurance premiums and wound up losing their home to pay for the damages.  They placed their remaining belongings into storage and promptly became entangled with the Internal Revenue Service and stopped paying their storage unit rental fees.  This too was unknown to the husband until he learned that his storage unit of rather high end belongings were sold at auction…again, the wife never told the husband about the late notices or auction notice.
A lot of lessons to be learned from the above examples and a solid reason you should take advantage of one or more of the service providers we offer here.
A bit of humor…seen on a bumper sticker:
If you must bur our flag – Please wrap yourself in it First!
Thanks to Perfectus Elder!
Resource Roundup – Share with your friends!

Commonly Overlooked Retirement Expenses


If all goes as planned, I am about three years away from retirement and I want to make sure when my retirement time comes I am budgeting as best I can for what my monthly/yearly expenses will be and not just for my early retirement years but my later years as well. I am sure I am overlooking some retirement expenses. I’d like to hear from those who have already retired what unexpected costs they have encountered that they did not think to plan for. You know what they say about best-laid plans, or in this case retirement plans! I just want to make sure I am as prepared as I can be, so I can avoid too much of the unexpected when it comes to my future living expenses.

Additional Resources that will come in handy
Get unlimited, free access to Stacy Johnson’s 2 hour personal finance education course ‘Life or Debt’. It’s the perfect thing for anyone who’d like to learn or review the fundamentals of good personal finance. Simply use the password ‘mtn001’ to stream the video here as often as you’d like (and please feel free to share with friends and family):
The Beginner’s Guide to Co-op Buying
Co-op buying is for more than just food. Learn about the many ways it can help you save.
8 Times You Shouldn’t Max Out Retirement Accounts
Piling money into your retirement accounts is often a good idea — except in these cases.


Want to Retire at 62? Do These 5 Things
Once you reach your late 40s or early 50s, it’s natural if you start wondering if you could retire in the next decade.

6 Fabulous Ways to Save After You Turn 50

From discounted meals to tax breaks, there is a slew of bargains you can enjoy after turning the Big Five-O.