¶ 3601
Overview
Scope of the chapter. Part VI addresses the defense of a plan after a creditor has appeared. This chapter covers the period between the client's first notice of a claim and the point, usually within a month, at which the client and counsel have settled on a strategy. It describes what the arrival of a claim changes in law, what the client and the planner may and may not do in that period, how insurance is engaged, how the existing plan is reviewed, what the creditor may do to secure its position before judgment. It also covers the conduct of an offshore trust and its trustee while the claim is pending. Later chapters take up discovery and privilege (see infra ch. 37), freezing orders and asset tracing (see infra ch. 38), contempt (see infra ch. 39), the trustee's position under sustained pressure (see infra ch. 40) and the enforcement of judgments abroad (see infra ch. 41).
Why the first thirty days matter. The planning chapters of this treatise assume that protective structures are built at T0, when no claim exists and none is foreseeable (see supra ¶ 220.02). Once a claim has been asserted, the client is at T2 as to that creditor (see supra ¶ 220.01). The protective value of what was built at T0 is fixed, and what remains to be decided is whether the client's conduct after notice will preserve it or impair it. Most structures that fail in litigation fail because of what was done after the claim arrived: a late transfer to the trust, a document created to support a story, an instruction to a trustee, or a statement under oath that could not be sustained. The cases discussed in this chapter and in chapter 39 are, for the most part, cases of that kind (see infra ¶ 3660.03; ch. 39). The first month is also the period in which the client has the most room to act lawfully: insurers can be put on notice before any prejudice accrues, records can be preserved before a duty to preserve is breached, defense counsel can be retained and paid in the ordinary course, and settlement can be explored before positions harden.
The persons involved. Four persons act in the window, and each has different duties. The client is now a debtor as to the claimant and is exposed to the avoidance rules, to discovery and, in some cases, to criminal liability for concealment or destruction of records (see infra ¶ 3620.06). Defense counsel represents the client on the claim itself. Planning counsel, who may be the same lawyer or a different one, advises on the existing structure and is bound by the limits of Model Rule 1.2(d) on any further transaction (see infra ¶ 3620.08). The trustee and any protector of a trust that holds the client's assets owe duties to the beneficiaries as a class and act under the trust instrument and the law that governs it (see infra ¶ 3660). A planner who advises in the window should identify at the outset which of these roles he or she occupies, and should record that identification in the file.
How to read the chapter. Paragraph 3610 describes the triage that should precede any action. Paragraph 3620 explains how the arrival of the claim changes the legal position of the client and of counsel. Paragraphs 3630 and 3640 cover insurance and the review of the existing plan. Paragraph 3650 describes the creditor's prejudgment remedies, and ¶ 3660 the conduct of an offshore trust while the claim is pending. Paragraphs 3670 and 3680 address what the client may still do and how strategy and settlement are approached. Paragraph 3690 sets out a thirty-day protocol and places the window in the Threat Matrix.