Surprise! You may already be an asset protection attorney take the quiz and find out.

Lawyers have different views about asset protection planning. Some feel it is an area they and their firms will not include in their practice. Mention asset protection planning to certain lawyers and they wince. The impression is that it is a "dirty" practice area and that those who engage in it are the ambulance chasers of the estate planning bar. Perhaps so as not to give offense, the Real Property, Probate and Trust Law Section of The Florida Bar named its committee focusing on asset protection and related issues the "Asset Preservation Committee."

The Asset Preservation Committee brings you a special series of articles in The Florida Bar Journal addressing, on a timely basis, the consequences of the 2005 Bankruptcy Act on issues such as homestead, retirement plans, limited partnerships, and other related areas.

This article is intended to enlighten Bar members on a number of methods frequently used by estate planning attorneys who have gained additional training in techniques to insulate clients' assets, within the limits of the law, from potential future creditors' claims. Like any area of law, most attorneys assisting their clients with asset protection planning are aware of the laws and provide advice based upon existing statutes, whether local, federal, or international (or combination). Most asset protection lawyers are aware of the ability to create a "safety net" around a portion of clients' assets prior to their incurring a contingent or actual liability. A majority of clients seek legal advice when there is no existing or contingent liability, but, instead, because they are concerned about what could occur in the future, especially in today's litigious society.

Certainly there are attorneys who are aggressive and skirt the limits of the law or go beyond them. Even reputable Bar members disagree on the ethics of asset protection planning and an attorney's ability to assist his or her clients, especially after a liability already exists. As indicated in Freeman v. First Nat'l Bank, 329 F. 3d 1231 (11th Cir. 2003), there is no cause of action under Florida's Uniform Fraudulent Transfer Act ("FUFTA") for aiding and abetting a fraudulent transfer when the party assisting in the transfer is not a transferee.

Does Freeman insulate attorneys from liability for any asset protection advice they may provide to clients? A prior article in The Florida Bar Journal seemed to suggest just that, concluding "[a]s to an attorney's previous concerns regarding exposure to third party liability claims and ethical considerations involving client transfers under FUFTA, following Freeman an attorney may be deemed to have an affirmative duty to competently advise clients as to their rights under the law so a client may acquire, possess, and protect property." (1)

The Florida Supreme Court in Freeman concluded that FUFTA was not intended to serve as a vehicle by which a creditor may bring a suit against a nontransferee party for money damages arising from the nontransferee party's alleged aiding and abetting of a fraudulent money transfer. However, the case does not provide an unqualifled "get out of jail free card" to attorneys and others who assist in fraudulent conveyance planning. There is an exceedingly important footnote in the Freeman opinion, not mentioned in the prior Journal article, that is required knowledge for anyone practicing asset protection. Footnote 4 states: "[w]e caution that our answer to the certified question in this case is confined to the context of FUFTA. We do not address whether relief is available under any other theory or cause of action." While there is no reported case in Florida in which an attorney has been convicted as a co-conspirator or under a similar theory for assisting a creditor, that is certainly a possibility. For example, in Chepstow Limited v. Hunt, 381 F. 3d 1077 (11th Cir. 2004), (2) the U. S. Court of Appeals for the 11th Circuit, applying Georgia law, considered whether a cause of action existed in Georgia against a third party who aids and abets a debtor in carrying out a fraudulent transfer. The court of appeals in Chepstow held that, while no cause of action existed under Georgia's Uniform Fraudulent Transfer Act, a cause of action may be brought against a third party "where the allegations are, as here, that they conspired with the debtor to defraud the creditor by hindering its collections of an outstanding debt...."

Most attorneys practicing in the asset protection area are rightly cautious about crossing any line that could cause the attorney to behave unethically or become a defendant in a creditor's lawsuit. However, just as there may be liability for overly aggressive asset protection attorneys, there may also be exposure to attorneys who fail to integrate asset protection goals with an overall estate plan. You may be giving more asset protection advice than you think. (3)

The remainder of this article illustrates that, whether or not they are aware of it, many attorneys are involved, to some extent, in asset protection planning. Those who publicly snub their noses at attorneys whose practices have a greater focus on insulating their clients' assets from future claims may be engaging in the very conduct that they criticize.

If you question whether you are involved in asset protection planning, answer the following eight questions and see how you fare on the "Asset Protection Planner Quiz." For each of the following questions, answer Never/ Almost Never (one point); Frequently (two points); or Always/Almost Always (three points).

Scoring

If you scored 12 points or less, you do not address even the most basic asset protection planning concepts on a regular basis. You may want to review your responses with your malpractice carrier to see whether it may be prudent for you to disclose in your engagement letters that you provide no advice on asset protection issues, and that clients may want to review your planning with an asset protection attorney.

If you scored 13 to 19 points, you are about average in addressing asset protection issues. While you may not consider yourself an asset protection attorney, you actually address many of the issues an asset protection attorney would address with clients.

If you scored 20 to 22 points, you have an asset protection emphasis but most likely would not cross the line into potential personal litigation, assuming your answer to question eight was Never/Almost Never.

If you scored 23-24 points, you are a very aggressive asset protection attorney and most likely fit the stereo-type that many attorneys are concerned about when reference is made to asset protection planning.

Based upon your score, you may be surprised to find that you could be considered to practice in the asset protection arena. Those scoring 22 points or less answered questions in a way that reflects a conservative approach to asset protection planning. For example, selection of a limited liability entity to take title to a new real estate investment; placing homestead sales proceeds in a segregated account until the next homestead is purchased; suggesting the car purchased for the client's son be titled in the son's name rather than in the name of one parent or jointly with the child; including "dynasty trust" provisions in the client's life insurance trust; and advising your client to discuss with his or her parents the need to revise their estate plan to provide gifts in trust rather than outright as a result of the client's pending litigation: all are issues that even those with a modest emphasis on asset protection planning would consider. Creation of a foreign asset protection trust for foreign investments is also conservative assuming that the transfer does not make the client insolvent. However, assisting in the creation of the foreign trust described in question eight makes you an aggressive planner, and there is a reasonable possibility that creditors could argue that you should have liability based upon the theories discussed above.

After reading this article, you should see that many attorneys actually practice within the asset protection spectrum, and those who do not consider some of the issues raised in the questions above may be providing a disservice to their clients unless they refer them to another attorney with a greater emphasis in asset preservation planning. Indeed, failing to respond properly to a client with facts similar to those in questions one through six could subject the client to greater personal liability than would be the case had they sought the counsel of an attorney with an asset protection emphasis.

Most attorneys who practice in the asset protection area are relatively conservative when faced with facts such as those described in question eight. However, as in many other areas of the law, there are differences in the ways attorneys practice. Furthermore, those who scored less than 13 on the quiz should consider whether they are creating potential malpractice exposure for themselves by failing to recognize issues that the clients should consider to minimize the consequences of future judgments against them. As indicated above, most estate planning and business attorneys are likely to need the skills to address basic asset protection issues. The Asset Preservation Committee will continue to provide information to The Florida Bar to educate our members on these issues.

Quiz

1) When a client calls to inform you that he or she is making a real estate investment or starting a new business, do you suggest that the client take title other than in his or her individual name, e.g., via an LLC, corporation, limited partnership, or as tenants by the entirety with a spouse?

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2) If a client tells you he is selling his or her Florida homestead and intends to purchase another residence in the near future, do you advise him to keep the sales proceeds segregated to maintain homestead protection of the proceeds until they are reinvested in the new residence?

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3) If a client tells you his or her son is a surgeon and is having difficulty maintaining malpractice insurance or is involved in a messy divorce, do you suggest creating a trust for the child in the parents' estate planning documents rather than providing for an outright gift to the surgeon/son?

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4) If a client calls to ask the best way to take title to a car that will be driven primarily by his or her 21-year old daughter who is a law student, do you consider the benefits of having the car titled in the child's name rather than in the parent's name?

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5) When your client purchases a large life insurance policy, do you consider adding "dynasty trust" provisions in his or her life insurance trust to provide both tax and spendthrift protection benefits for the children and more remote descendants?

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6) If your client is involved in existing litigation that could result in a large judgment against him or her, do you inquire as to whether there is any possibility of an inheritance from his or her parents or spouse and, if so, do you suggest revising the estate plan to provide for gifts in trust rather than outright?

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7) Do you suggest clients consider foreign trusts to hold title to foreign security investments that have been recommended by their investment advisor to diversify asset allocation?

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8) If a client calls after a terrible auto accident where he was ticketed for driving while intoxicated, do you suggest that he or she take the bulk of his or her assets and create a foreign asset protection trust?

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Total Points: --

(1) Kleinfeld & Alper, The Florida Supreme Court Finds No Liability for Aiding or Abetting a Fraudulent Transfer, 8 FLA. BAR J. 22 (June 2004).

(2) See also Morganroth & Morganroth v. Norris, McLaughlin & Marcus, P.C., 331 F.3d 406 (3d Cir. 2003) (Court of Appeals for the Third Circuit remanded to the district court in New Jersey whether the defendants, who were attorneys, knowingly and intentionally participated in a client's unlawful conduct to hinder, delay, and/or fraudulently obstruct the enforcement of a judgment; also reasoning that such a finding would satisfy a claim for creditor fraud against the lawyer under New Jersey law).

(3) For a summary of some of the potential consequences (i.e., disciplinary actions, damages to creditors, fines, and penalties) for failing to integrate asset protection goals with an overall estate plan, see Oshins, Family Wealth Protection and Preservation, 132 TRUSTS AND ESTATES 38 (February 1993), and Spero, ASSET PROTECTION, Ch. 2 (Warren Gorham Lamont 2001, Supplemented through 2004). In response to the question as to whether attorneys have a duty to advise clients to engage in asset protection planning, Spero states: "Even though there are no reported cases that establish such a duty, case law suggests that such a duty exists. Accordingly, it is advisable for estate planning lawyers to either counsel their clients on asset protection or to exclude such matters from the scope of their duties.... In light of the widespread discussion of asset protection issues, as evidenced by the increasing number of seminars, articles, and books on the subject, asset protection may be elevated to the domain of 'skill, prudence, and diligence as other members of the legal profession commonly possess and exercise,' thereby creating a duty on the part of lawyers to advise clients to engage in asset protection planning or to refer the client to another attorney qualified to do so." Id., [paragraph] [2.04[2].

Barry A. Nelson is founder of the law offices of Nelson & Levine, P.A., and The Victory School for Children with Autism, both in North Miami Beach. He is Florida Bar board certified in both taxation and wills, trusts, and estates. Mr. Nelson is also an adjunct professor at the University of Miami School of Law Graduate Tax Program, member of the American College of Trusts and Estates Counsel, and chair of the Asset Preservation Committee of The Florida Bar Real Property, Probate and Trust Law Section. He received his LL.M. and J.D., cum laude, from the University of Miami School of Law.