Many people fear that they will one day lose a lawsuit, and that all their hard earned assets will be taken away. A google search for "Asset Protection" will reveal numerous companies that play to that fear, and offer strategies to prevent creditors from taking your assets. Some of these strategies are legitimate, such placing funds into retirement accounts. Others, such as buying insurance, are actually beneficial to all concerned. For the most part, however, asset protection means committing fraud on your future creditors. It is relatively easy to see why.
Asset protection usually means placing assets into a "trust" which the owner still controls. The owner can do whatever he wants with the trust assets, including spending them or taking them out of the trust. These trusts have provisions that state that, when you are sued, or a judgment is entered against you, you "lose" control over the trust. The trust is then run by some third party in an off shore location, and it is supposedly impossible for creditors to get at the funds. I am not aware of any court in the United States upholding such a provision, nor stating that it is anything other than blatant conspiracy to defraud creditors.
An asset is either yours or it is not. If you really wish to give away your assets, you are free to do so (so long as you still have enough money to pay your debts). If not, then the assets are still yours and your creditors are entitled to get them if you do not pay your debts. One major way asset protection works is by trying to have it both ways -- the assets are yours when you want, but are not yours when creditors come knocking. No court is going to let you get away with that.
The other major way asset protection works is outright fraud. Just hide your assets from the creditor. And lie. Sadly, fraud works, but then again so does robbing a bank. On the other hand, getting caught committing fraud has consequences. The consequences of engaging in asset protection is that you will have a very hard time ever filing bankruptcy if you need to do so. Bankruptcy courts generally make debtors account for their assets before they discharge debts. If you tell the Judge, "I used to have money, but I sent it all to the Cayman Islands so my creditors couldn't get it," you are not likely to get a discharge any time soon.
Some of these "asset protection" companies pretend to legitimate businesses. For example, take a look at the following website: http://www.southpacgroup.com/contact.html. These people operate a scam. My client has a judgment against them for more than $3,000,000 as a result of their attempts to help a rapist avoid paying his victim, but that does not stop them from teaching "continuing education" courses to members of the California State Bar. Or consider this website: http://www.assetprotectioncorp.com/. It is run by disbarred lawyer Robert Lambert, who says, "All asset protection techniques have one thing in common: they each make it more difficult for a creditor to either find or take assets." Ask him if he can tell you about a single plan he has devised that withstood an attack in court.
Many asset protection companies try to justify their actions by blaming the legal system. "Those evil lawyers are just predators, waiting to take your hard earned money away." I am no fan of our legal system, but asset protection does not offer reform: it offers chaos. A creditor can only take your money if, after a trial, a court determines that you owe the money. If you insulate yourself from that, you place yourself above the law. More importantly, no one can seriously hope to live in a society with things like bank accounts, long term leases, credit or home ownership if anyone can simply stick their assets into a trust and avoid paying their legitimate bills. Would you loan money to anyone, knowing that they could avoid repaying you by placing all their money in a trust?
Incredibly, no one seems to care about the asset protection industry. It would be easy enough to shut down. California has no obligation to honor corporations or trusts from countries such as the Cayman Islands or the Cook Islands, which are essentially safe harbors for white collar criminals. California could shut down most or all of Southpac's business by simply forcing the Cooks Islands to choose -- either enter into reciprocal agreements to enforce each other's judgments, or your corporations and trusts cannot do business in our State. California could shut down Robert Lambert by prosecuting him from practicing law without a license -- a felony, considering that he lost his license.
Asset protection is nothing more than a scam, designed to trap the greedy and the fearful.