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Minor Child Liability

Parents are financially responsible for the actions of minor and dependent children living at home. Families with income, a home or any assets should ask about the risk and liability they are exposed to and how to protect themselves from it. The primary residence, future income, investments and real property can be protected from liability with a solid asset protection strategy.

Parents should acknowledge the lawsuit risk that actions of their children and children’s friends at the family home represent. From driving the family automobile, to having a social gathering when parents are out of town, minor drinking incidents or even skateboarding an empty swimming pool – things that most children do before they are independent – can cause legal action that turns the family’s financial future around in an instant.

In the cases of a child injury or major accident the parents of the victim typically react emotionally and pursue maximum damages in a drawn out legal battle – and there are contingency attorneys who specialize in these types of cases claiming parental negligence.

Any family who has been sued for a minor child’s actions resulting in a judgment or settlement would wish to rewind the clock and implement a form of protection that secures the family’s financial future from this type of liability.

Insurance policies are the first layer of protection and come with coverage limitations as well as legal teams whose purpose it is to have a claim denied. Individual or family auto and home owner insurance policies should be purchased with maximum coverage.

In the event of an incident that is not covered by insurance or beyond the policy liability limits the only personal financial protection is an asset protection strategy.

Family Financial Protection

Families have several options to establish a protection strategy quickly and easily that provide a significant amount of security affordably. A strategy that protects against lawsuits of child liability established prior to the need created with estate planning tools and asset protection vehicles are the strongest plans.

Family Planning Instruments

A family limited partnership (FLP) is a preferred legal tool that offers excellent lawsuit and judgment protection. Family members are general partners in the entity with parents acting as managing partners. This is a very flexible and tax neutral legal vehicle that allows assets to be transferred into and out of the partnership easily.

FLP Asset Protection

In the event that a general partner is sued resulting in a judgment, additional legal action is required to pursue assets encumbered in the partnership. A judgment creditor must attain a charging order against the partnership interest of the liable party. This gives the creditor rights to that general partner’s distributions, however managing partners control asset distributions to the general partners and do not have to make any distributions to that partner. A charging order scenario is not always attractive to a creditor because they are aware that distributions may or may not be made to the debtor partner and the creditor will have to pay taxes on the general partner’s share of the assets, whether it is distributed or not.


Trusts are estate planning instruments that hold assets for the benefit of trust beneficiaries. Assets encumbered in a trust are not available to satisfy a judgment against a trust beneficiary. There are several types of trusts available for use in an asset protection strategy providing families with strong options to protect income, property and their home against lawsuits.

Business Entities

The use of business entities to encumber real estate separates the asset from an individual’s name protecting the asset from personal liability of the company members and other external liabilities, such as the actions of a company member’s child. Using LLCs to encumber properties is an excellent tool that can be used in concert with a trust and an FLP in a single protection strategy.

Families have liability hazards that come with raising children, driving automobiles and owning homes. In today’s litigious society families should be especially careful with their financial future and explore the protection options available with a qualified professional.