[fusion_text]There are a number of ways family members can lose their hard earned wealth. One possibility for loss is frivolous lawsuits. Furthermore, they often take a serious psychological toll.
A way for family business owners to potentially inoculate themselves against groundless legal actions is by adopting appropriate asset protection strategies. Asset protection planning is the process of employing risk management products and legal strategies to ensure an individual’s or a family’s wealth is not unjustly taken. Moving beyond the astute use of property and liability insurance, some of the strategies are quite rudimentary and predicated on dissociation. More sophisticated approaches to asset protection planning incorporate transformation strategies. The use of captive insurance companies, for example, can be very effective in the right situations.
While the logic of asset protection planning is quite strong, relatively few family members are doing such planning. In a survey of 336 middle-market family businesses, slightly more than one in five family members who are C-level executives at their firms have formal asset protection plans. Less than 15% of first generation survey participants and about 35% of second-generation participants have formal asset protection plans.
According to Sean Aylward, a member of Chiesa Shahinian & Giantomasi PC, “Being forward thinking about the possibility and consequences of being wrongfully sued generally is not a major concern among many family business owners until too late – until they are sued. When that happens it’s really too late to take action. Restructuring assets at that time is likely to be considered a fraudulent conveyance. That’s why we work closely with our family business clients and their other advisors to construct and implement asset protection plans specifically tailored to their needs.”
“Asset protection planning is a type of sophisticated planning that all business owners – including family business owners – should seriously consider. Asset protection planning should be integrated with other type of legal work such as estate planning because of the potential overlap in strategies and this way the family business owner is getting powerful solutions to a number of considerations,” says Rick Flynn, managing partner of FFO Business Management & Family Office, and the author of The High-Functioning Single-Family Office.[/fusion_text]