PRINCIPLES OF PROTECTION OF ASSETS
Asset protection means strategically separating professional and private risks. Bankruptcies, legal disputes, creditors, but also the separation of private and professional partners and divorce are seen as threats to one’s own assets. For the wealthy problematic is the realization that the implementation “from a single source” is rarely to obtain on the German market.
TEXT: DR. JOHANNES FIALA
The sales approach of the banker or financial services provider to put “products and solutions” in the foreground is just as often only half the battle, as is the honorary approach of “tax and legal structuring” in an effort to control tax and insolvency risks. If international issues are added, the limit to excessive demands is quickly reached. Moreover, many advisors in wealth management suspect that they lack fundamental knowledge of risk control through insurance solutions.
ASSEtS OF tHE ACtIVItIeS OF tHE fInAncIAl ACtIVItIeS
Corporations offer legal ways to keep business risks away from personal assets. The subtleties start with the comparison of alternatives, especially when it comes to pass-through liability. In Germany, it is the trend of case law to hold the management liable for undercapitalisation by using a “Cinderella GmbH” with the consequence of personal liability. A look across the border, for example at the limited liability company or the limited partnership, is not only exciting from a tax point of view. Active risk management in the business sector, as well as audits to safeguard the entrepreneur, are still not the rule. Here, too, implementation requires legal controlling, cross-border implementation support and coordination.
LIFE INSURANCE WITH BANKRUPTCY PRIVILEGE
In various legal systems, it has been politically implemented that asset protection for old age takes precedence over creditor protection. This means that a partial flight of capital is pre-programmed – including the option of optimising estate planning as well as, for example, inheritance and gift tax.
TRUSTS AND FOUNDATIONS FOR PRIVATE RESERVES
Those familiar with the court process in probate matters are pleasantly surprised to find, for example in the case of US assets, that a freeze on asset management by trusts is achievable. Trusts not only offer significant domestic tax advantages. Above all, they can also be an instrument for permanently removing assets from the reach of creditors after the expiry of certain pubic periods. moreover, they are an integral part of estate planning. Many a top athlete is surprised to learn after an expensive divorce that the right residence would have saved him a lot of money and aggravation. Cross-border alternatives, a competition between legal systems, are not regularly part of the compulsory training programme for advisers in this country. Sensible asset protection arrangements result in the use of insurance only for residual risks: For the wealthy private client it is certainly important to realise that the vast majority of financial plans for expensive money are literally built on sand. This is because the “financial planner” in private banking is generally not trained to recognise, check and adequately insure risks.
RA Dr. Johannes Fiala De-la-Paz-Strasse 37 80639 Munich Tel.: +49/89/17 09 00 Fax: +49/89/17 90 9070 www.fiala.de
(finest.finance! 6/2007, 49)
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About the author
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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