An Internet search of the words “asset protection” or “asset protection attorney” turns up many things: one thing that does not necessarily turn up is a competent attorney. Unfortunately, sometimes even the best attorneys make mistakes, too.
Two prestigious law firms in South Florida, Proskauer Rose and Becker & Poliakoff, recently had articles written about them for actions some of their attorneys took in helping clients with “asset protection planning.”
When a negative article is written, the attorney is always the first to be blamed. Cliches such as “bad facts make bad law” are used.
The attorney is chided for being “overly aggressive” or “engaging in estate planning when it was too late.”
Fortunately for all parties involved, authors of articles are generally not sitting in on the planning consultation; much can be speculated about, but unless someone is actually there with the attorney in question, the whole truth is never known.
What did the Proskauer Rose attorney know about his client in the New York case of Sardis v. Frankel, 978 N.Y.S.2d 135 (N.Y.App., Jan. 7, 2014) that a blogger writing a post did not know? What additional facts have not been reported by media outlets speculating on a Miami-Dade malpractice case against Becker & Poliakoff?
Ultimately, not all of the facts will come out: malpractice lawsuits will be settled, if not disappear completely, and court cases involving the debtor alleged to have engaged in “asset protection planning” will settle out once the debtor agrees to use exempt assets to pay judgments.
Many of our clients, such as doctors, lawyers, entertainers and corporate executives, rely on so-called “asset protection planning” to preserve the assets earned over time throughout a long career.
Attorneys who specialize in asset protection planning can limit their malpractice exposure by doing a combination of the following:
• Plan with exempt assets. Under Florida law, cash value of life insurance, tenants by the entirety assets and homestead property are just a few of the many exempt assets that clients come into our offices to discuss how to best utilize in asset protection planning. Some issues that come up in planning with these assets are: devising homestead when there are minor children involved, re-titling joint assets as tenants by the entirety pre- versus post-judgment or receiving required minimum distributions from an individual retirement account, among others. This discussion is deemed by the novice lawyer as “asset protection planning.” However, it should be properly termed “planning with exemptions provided pursuant to Florida law.”
• Honestly assess the client’s likelihood of success. In law school, attorneys are taught to “argue both sides,” and client consultations should be no different. If the attorney does not think the client has a great chance to get out from under a judgment or looming litigation, the attorney needs to convey that opinion to the client in such a way that the client will know up front whether the planning sought to be taken will be effective. Attorneys are quick to offer the solution first and then convey the drawbacks later, sometimes on paper following the initial conversation. Why not reverse the order and describe the drawbacks first and in person? A subsequent memo can then be sent listing the pros and cons. The attorney has then protected himself or herself from the client later claiming “I did not know that” or “I was not told that.”
• Asset protection was not the only reason. One thing that commentators have accurately pointed out is that the attorney should be slow to label the engagement as “asset protection planning.” The problem is that when an attorney’s file is papered with the words “asset protection planning,” following discovery, judges automatically view any legitimate estate planning attempts as fraudulent to creditors upon seeing the words “asset protection.” The solution is not avoiding asset protection planning. It is to be more accurate in the attorney’s description. For example, if the attorney is planning with exempt assets under Florida law, the attorney needs to specifically state, “I spoke to client on benefits and drawbacks of planning with exemptions provided Florida residents under Florida law such as annuities, life insurance, homestead and tenants by the entirety.” Why does the attorney feel like adding the words “asset protection planning” is of any use? Sure, it shortens the bills and memos, but that is not what the attorney is actually doing. More detail and less slang is the key.