One Compelling Argument to Move Assets Offshore – Lawsuits

Lawsuits - Is the answer in one word. The undisputed world heavyweight champion of civil litigation is the USA. The USA has one lawyer for every 265 people, counting men women and children. If you just counted adults it would be much lower. For a perspective Japan has one lawyer for every 5,800 people. There are over 1,000,000 lawyers in the USA (exact figure is 1,143,000, source is ABA year of 2007). In 2008 it is projected that 15 million civil lawsuits will have been filed in the USA in the state courts alone. This is about a 1 in 18 chance of getting sued but if you reduce this to only take into account adults since it is rare a child gets sued, then it gets to about one in ten or a 10% chance of getting sued (approx). Then one must add into this figure the amount of litigation filed in the Federal courts, which would be a much lower figure but still makes things worse. Don’t think that this phenomenon just applies to the USA because it is happening in many other countries.

Number of Lawyers per capita in Various Countries

• Brazil – 570,000 Lawyers or 1 for every 325 people.
• Spain - 114,000 Lawyer or one for every 400 people
• Italy – 121,000 Lawyers, or one for every 490 person
• UK – 150,000 Lawyers, or one for every 400 persons
• Germany – 140,000 Lawyers, or one for every 593 persons
• France – 45,000 Lawyers, or one for every 1400 persons

Lawyers Provoking More Litigation – The Internet has been a wonderful tool for lawyers to develop new clients. If you enter “lawyer referral service” into Google you get 1.3 million hits. Try “legal match” and you get 5.9 million hits. Imagine that. Internet based lawyer finding services are thriving. If you enter “cheap airplane tickets” you get 6.8 million hits. Scary isn’t it. One could make a reasonable assumption that people are looking for lawyers as much as they are look for cheap airplane tickets. Then one has to ask themselves how often do people fly each year. Now ask yourselves how often they intend to sue each year. Gets very scary doesn’t it. Wait it gets worse. They have taken it to a new level. They have these legal matchmaker sites (yes sort of loosely based on the dating sites) that have you enter data about yourself and your possible litigation to see if there is a lawyer that is interested in pursuing a courtship possible leading to a marriage which could be thought of as them taking your case on contingency. Here are some such services:

• http://www.legalmatch.com
• http://www.sueeasy.com/
• http://www.lawyerfinder.com/

This one specializes in class action lawsuit lawyers:

• http://www.mesotheliomalawyerfinder.info/

This one specializes in finding rare medical malpractice suit lawyers. This keyword is one of the most expensive Pay Per Click keywords exceeding Rolex, Plasma TV etc.

• http://www.injurylawyerfinder.com

This one is for personal injury lawyers

• https://www.lawsuitfundingfinder.net

This one is amazing. They help a person find advance funding for their lawsuit.

Discussion – The purpose of this article is not to tell you that such frivolous litigation practices are extremely detrimental to the functioning and continuation of a civilized society. That would be explaining the obvious. It is to tell you that your hard earned wealth is at risk if you live in a litigation prone country of which there are many. We will now illustrate some of the simple to understand advantages of having your assets offshore in a tax and privacy haven away from the reaches of the lawyer in the country you live and/or operate a business in. Assets are always best kept outside the country you live and or work in.

Diminished Litigation Target Profile – Lawyers do an asset check to see what assets a person or entity has before attacking them in court. These legal attacks are expensive. They are either contingency or the client has to pay, sometimes a combination of the two. Lawyers can get sued by their clients who paid them and got nowhere. The lawyer has a responsibility to not waste the client’s money. Of course he hates to waste his own money on a lawsuit where there are no assets to get. Remember these are lawsuit happy countries and the lawyers do get sued too.

These litigious clients would love to sue their own lawyer if they could. Lawyers have malpractice insurance and that interprets to the person suing as deep pockets. To protect himself the lawyer has to make sure the target they are suing has suitable assets to make the legal effort worthwhile. These lawsuit prone countries have eliminated privacy enough to make asset checks possible and even easy. They look for stocks, bonds, mutual funds, boats, planes, cars, real estate and of course bank accounts. When assets are located anonymously offshore the asset check does not pick these assets up. This substantially reduces your target profile and can cause these lawsuits to not happen in the first place.

This may happen all without your even knowing you were being sized up for a lawsuit; you just never get sued because you are no longer a viable target. Placing real estate in the name of an anonymous offshore corporation can be helpful since these public registries in say Panama does not reveal the owners of the corporation. This means they have no way of knowing who owns the real estate. Asset checks are done in a person’s name or if they are suing a domestic company the name of the company. Transferring a piece of real estate you once owned to an offshore company can be complicated and this needs to be dealt with on a case-by-case basis.

Attachment, Seizure and Confiscation of Assets - Going offshore also removes the risk of a secret attachment. We have spoken to numerous people who wake up one day to find out their bank accounts, home, cars and other assets were frozen, seized, towed etc. The plaintiff goes to court in secret and meets with the judge. This is called an ex-parte proceeding. Their lawyers assure the judge that their case is very good and you are likely lose and then flee with your assets. Heck they are trying to wipe you out and leave you penniless, this a judge can be quick to believe.

They then file the lawsuit and simultaneously get the judge to lock up all your assets pending their disposition at the end of the trial. How you are supposed to pay your legal fees is your problem. Plaintiffs usually have to post a bond for this to be granted. Rich lawyers and large corporations have no problems with this. So when you find out you are in a lawsuit you also find out you had all your assets that they could find frozen by the court.

Another term often used for this unconstitutional forfeiture of assets is “injunctive relief”. It is a rare day when one sees these assets ever returned to the owner. Governments love to pull this when they go after someone in a civil action. In a good tax haven privacy jurisdiction like the ones we use this is not going to happen. This leaves you in a much better posture to deal with the litigation. Settlements can come easier and cheaper. If your assets are beyond their reach what do they do if you decide to retire abroad? That is end game for them so negotiation can often be a cost effective solution especially if you are able to negotiate from offshore.

Planning – This is the key. Plan before there is even a hint of trouble. Once trouble starts then you have to worry about fraudulent conveyance issues, which are not insurmountable problems at all, but they are other factors that you will need to deal with. Fraudulent conveyance cases are tough to win and expensive. If there is no trouble at all then this is not an issue. Do it before you become a victim. When you talk to your lawyer about an asset protection structure be open and up front about any legal issues expected or actually in process.

Footnote – While we are a law firm, we are an asset protection law firm. We do not do personal injury, we do not do family law, we do not take contingency cases. We will defend our clients and their hard earned assets from attack but we do not go out and attack. In other words we are not the sharks, we are the protective net that stops the sharks from getting in to bite you.