The Logic Behind Asset Protection

It is often said that the key to success is hard work. For those who measure success by the riches they have acquired, then wealth accumulation is essentially a by product of a very productive career.
Many people all over the world consider success as having access and ownership to financial resources. The ability to purchase or avail of almost anything in an instant regardless of price is a dream for many individuals. Taking ownership and gaining control of various assets puts one in a position of power over others who have fewer assets to speak of.
But does the pursuit of success end at the acquisition of wealth? Do you stop when you have earned your first million? Should you retire once you have bought your dream house? Are there no more responsibilities past acquiring once assets?
Wealth Is Fleeting
The truth is, in most cases, financial success is a constant pursuit. As the saying goes, you cannot rest on your laurels. You have to keep at it if you want to retain your position in the status quo.
After all, wealth is fleeting. Financial gains are in general temporary. And whilst we hear and are fond of rags-to-riches stories, there are also riches-to-rags stories that in reality happen more often than we think.
Protecting Assets due to Limited Opportunities
One view regarding achieving financial success involves the concept of opportunities. Whilst it may be true that achieving success comes through hard work, the level of success varies greatly amongst successful people due to chance.
In a hypothetical situation, given a level playing field, equal capacities, equal access to resources, and the same amount of time, chances are people will be able to gain the same level of achievements. What would differentiate one person to the next will be the varying opportunities that are made available to them.
Once an asset is gained through a particular opportunity, the chance that you will be able to repeat your success under the same circumstances becomes more improbable. Should you lose that asset for some reason, it is likely that you won�t be able to gain it back. Otherwise, the regaining of the asset will most likely be at a much higher cost.
Hence, protecting ones assets from loss is justifiable because favourable opportunities are limited in the real world and there are just too many risks. One cannot simply wait and hope that nothing unfortunate happens that will cause wealth to change hands.
Protecting Assets from Risks
Many things can happen that will cause a person to lose his possessions. For example, fires can burn down a home, built from the earnings of a lifelong labourer, in a matter of minutes. Theft can cause a man to lose his priced car. An illness can drain an entire family of their fortunes.
None of these things are desirable. That is to say that no one wants to experience any sort of loss. Some of these factors are uncontrollable like natural calamities and such. Other factors are unmistakably instigated by man and can thus be controlled.
Understanding Asset Protection
One important area in finance is wealth management. Asset protection is an aspect of managing wealth. In wealth management, taking insurance is the first line of defence against losses due mainly to incontestable events such as fires or death.
Asset protection on the other hand involves shielding ones possessions against civil suits. In other words, asset protection involves ways of using various legal structures designed to protect what you own from unfavourable money claims.
Depending on various determinants, there are different asset protection schemes available, not all of which are applicable in all cases. Different types of assets � for instance, real estate, cash, vehicles, equipment, gold, jewellery, etc. � may require different approaches for protection.
Common asset protection techniques involve transfer of the asset to various trusts, borrowing off the asset or even outright sale of the asset. The focus for asset protection is to make it difficult for any claimant to get at your asset. This is why offshore asset trusts is advised for high-risk people because any claims made at this level can be very costly for creditors, thus making the protection scheme quite effective.
At any rate, asset protection cannot completely protect a person�s wealth from unfavourable judgments. At the very least, it would delay the collection of any sum, enough for the debtor to pay off the amount without the need to give up the asset.
ABOUT THE AUTHOR: Carlo Scevola, MBA, CTA
As president and CEO of Carlo Scevola & Partners, Carlo Scevola is ultimately responsible for the success and satisfaction of each of the firm's clients. Mr. Scevola contributes strategic direction to each client engagement and may be deeply involved in the day-to-day planning and execution as well.
Mr. Scevola's background makes him well suited for international consulting work. An expert in both civil and common law, as well as quantitative finance, he is also a member of the UK Securities & Investment Institute, and he holds a MBA.
Known for his innovative thinking and broad-based expertise in operations, finance and business development, Mr. Scevola has run CS&P since the early 90's.
He is an active sportsman and former alpine ski racer in international circuits. He now enjoys free ride skiing and golf. In his spare time, he relaxes by playing the cello.