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Asset Protection Planning Facts

Asset Protection Planning Facts

Most people spend more time planning a family vacation than protecting their wealth from a lawsuit. Thus, it’s one of the topics that doesn’t enter one’s mind until it happens. So, that’s the only thing in their mind. Let’s look at some asset protection planning facts and lawsuit statistics. Knowing the benefits of asset protection, gathering information about planning your strategy, then taking action can help you secure your wealth before losing everything you own.

personal injury

Lawsuit Statistics

  • 78% of lawsuit defendants never thought it would happen to them
  • The US has 80% of the world’s lawyers.
  • 96% of all lawsuits are filed in the U.S.
  • A new lawsuit is filed every 30 seconds, on average
  • The self-employed and small business owners have a 33% chance of becoming a defendant in a lawsuit
  • There are over 100,000 students in law school today
  • The median damages awards are $201,000.
  • FBI reports that a quarter million criminals make their living through lawsuits
  • Asset Protection is not just for the wealthy. Recent studies show that the average income bracket for targeted lawsuits is under $200,000 a year.

plan ahead

Why Plan Ahead

By establishing an asset protection plan before it’s necessary, you are preserving your wealth. First, something happens that leaves you vulnerable. Then, someone hits you with a lawsuit jeopardizes. Any transfer of your assets at that point is subject to scrutiny under fraudulent transfer laws. When someone sues you and you give your assets to a family member, courts can quickly interpret it as an attempt to defraud a creditor. As such, the creditor can now sue your family member.

If you transfer assets or property knowing that someone will likely sue you, you could face with defending the asset transfer. As such, the transfer could be disregarded by a court or reversed and it may come with additional fines or penalties. Asset protection is much more difficult after you need it. However it is possible to protect yourself after a lawsuit. It is just subject to more scrutiny.


Where Liability Comes From

Liability can come from many situations that seem harmless, for example; one’s own home, automobile, workplace, employee, spouse, real estate investments, having a swimming pool, even minor children. Liability is all around us at almost any given time.

In some cases an individual cannot limit their liability outside of separating personal and business assets. This is where planning ahead for personal asset protection pays off.

asset protection liability

Unprotected Liability Exposure

In many business owners use corporations or LLCs to defend against business liability . In others, such as the sole proprietorship or partnership, there is no protection. Consider that liability often strikes from the least expected places. So that is why it is important to know where you are vulnerable and then take steps to protect your assets. Here are some examples of where you may be exposed.

  • Parents are 100% liable for the actions of their minor children. Sometimes adult children still living at home as dependents create risk. There have been cases where children have had an underage party with alcohol at the family home. Others where an auto accident resulted in a devastating lawsuit.
  • Investment properties and owning real estate is an open door to liability. Personal injuries, accidents and other incidents result in tenants and their guest suing the property owners.
  • Marriage often doubles one’s liability. By introducing the responsibility of a spouse’s debts and actions in many states – liability from one partner in a marriage can expose the assets of the other spouse. This is especially the case in community property states. It is slightly less so states that offer tenancy by the entireties.
  • Having employees, business vehicles or a workplace can jeopardize the personal assets of the business owner.
  • Some states have homestead protection, but most do not protect the full value of the home. So, know the homestead exemptions by state.
  • Some states protect IRAs from judgments but some not fully. Some states protect all IRAs and some let creditors take Roth IRAs. Knowing the IRA creditor protection by state may give you some ideas about how much you can secure in this type of retirement plan.

court gavel

Asset Protection Planning Facts Conclusion

Asset protection planning is the analysis each individual’s risk and placing a barrier around the assets exposed to that risk using an appropriate legal tool. If asset protection is needed, it comes in many forms. There are ways to shield one’s wealth from present risk and liability whether it’s from being a parent or an anesthesiologist.

Last Updated on February 11, 2021