Most people spend more time planning a family vacation than protecting their wealth from a lawsuit. It’s one of the topics that doesn’t enter one’s mind until it happens, and then that’s the only thing in their mind.
- 78% of lawsuit defendants never thought it would happen to them
- 90% 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
- 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.
Why Plan Ahead
By establishing an asset protection plan before its necessary you are preserving your wealth. In the event that your assets are jeopardized or you are a defendant in a lawsuit, any transfer of your assets is subject to scrutiny under fraudulent transfer laws. If you are sued and you give your assets to a family member, it can be quickly interpreted as an attempt to defraud a creditor resulting in a criminal charge.
If you transfer assets or property knowing that you are likely to be sued you could be faced with defending the asset transfer. 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 and will take much more careful measures.
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.
Unprotected Liability Exposure
In many cases business liability is encumbered through a legal entity using corporations or LLCs, in others there is no protection without asset protection in place. Consider the cases where unprotected liability strikes from the least expected place.
- Parents are 100% liable for the actions of their minor children and sometimes adult children still living at home as dependents. There have been cases where children have had an underage party with alcohol at the family home where an auto accident resulted in a devastating lawsuit.
- Investment properties and owning real estate is an open door to liability whereby personal injuries, accidents and other incidents result in suing the property owners.
- Being married doubles one’s liability by introducing the responsibility of a spouse’s debts and actions in most states – liability from one partner in a marriage can expose individual assets as well as joint property.
- Having employees, business vehicles or a workplace can jeopardize the personal assets of the business owner.
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. There are many forms of shielding one’s wealth from present risk and liability whether it’s from being an anesthesiologist or parenting.