Civil lawsuits are one of the biggest threats to your wealth. All it takes to put your life savings in jeopardy is an honest mistake, like a car accident, and a sufficiently motivated attorney. However, while lawsuits are an ever-present risk, there are actions you can take to minimize their impact on your wealth.
Here, we’ll teach you the basics of protecting your assets from a civil lawsuit. Using this information, you can work with us to set up a plan that keeps your wealth safe even if you get sued:
- Start Planning Early
- Maintain Good Insurance Plans
- Avoid Owning Assets in Your Name
- Use LLCs to Separate Business and Personal Assets
- Set Up Offshore Trusts
- Can You Lose Your House in a Civil Lawsuit?
Start Planning Early
Protecting your assets from a civil lawsuit should start long before a lawsuit takes place. The strongest safeguards work best when they’re already set up, as judges will have a difficult time proving that your tools were established specifically to avoid paying this particular judgment. Additionally, it takes time to establish an asset protection strategy, so it’s always best to start early and use lawsuit prevention measures.
Maintain Good Insurance Plans
A basic but powerful way to protect your assets from a civil lawsuit is to carry solid liability insurance in layers. At a minimum, that usually means good auto and homeowners policies, plus an umbrella policy for extra coverage.
Umbrella insurance kicks in when a big personal injury or accident claim blows past your standard policy limits, so the insurer’s money pays the judgment while your assets remain safe. This single move doesn’t fully safeguard against lawsuits, but it does significantly raise your risk threshold.
Avoid Owning Assets in Your Name
One of the best ways to protect your assets from lawsuits is to “own” as little as possible. This doesn’t mean that you can’t have nice things. It simply means that a majority of your assets should be legally held by another entity.
The reason you want to keep assets out of your name is fairly straightforward. If a creditor or their attorney doesn’t know that you own a particular asset, they can’t demand it as repayment for a judgment. In fact, using another entity to own assets can prevent you from being sued altogether.
When a contingency fee lawyer is approached to start a lawsuit, they often begin their work by running an asset search on the potential defendant. If their search shows that the defendant doesn’t have many assets, they may not choose to pursue the case since it would ultimately be a lot of work for a meager payday.
One of the most popular ways to shift ownership of your assets is a land trust. These trusts are used to hold real estate and appear as the listed owner on the actual deed and title of the property. Using a land trust also allows you to implement more complex asset protection strategies, such as equity stripping, which can fully protect the value of your real estate.
Common Concern: Can You Lose Your House in a Civil Lawsuit?
Many people know that they can lose rental properties and other real estate in a civil lawsuit but assume that losing their home isn’t on the table. Unfortunately, you can lose your house in a civil lawsuit. If the state where you live does not have a robust homestead exemption law, the value of your home can be used to fulfill a judgment.
In a typical scenario, if someone wins a judgment against you that you cannot pay, they can record that judgment and turn it into a lien against a valuable asset that you own. Once that lien is in place, you cannot sell or refinance the asset until the lien is paid. If you do attempt to extract any value from the asset, it will automatically be used to repay some or all of the lien, depending on its value.
Fortunately, you can still protect your house from being seized in a civil lawsuit. By implementing land trusts and equity stripping measures, you can place the value of your primary residence into an offshore asset protection trust that creditors cannot access.
Use LLCs to Separate Business and Personal Assets
If you run a business, own rentals, or have side projects, you can protect your assets from a civil lawsuit by keeping those risks away from your personal accounts. Creating and properly maintaining a limited liability company (LLC) or corporation can shield your personal home and savings from claims related to your business dealings.
Set Up Offshore Trusts
For those who work in high-risk professions or have a high net worth, offshore asset protection trusts are a powerful tool that can protect assets from a civil lawsuit. These trusts work exceptionally well as an asset defense tool because the trustees who run them are not required to adhere to U.S. court judgments.
Essentially, if you lose a lawsuit in the United States but have placed a majority of your belongings into an offshore asset protection trust, a creditor will have to try and fight the case again in the jurisdiction where your trust is based. Doing so is often prohibitively expensive, and the laws in these jurisdictions are designed to protect trust creators, making it far less likely that the creditor’s lawsuit will succeed.
Call Asset Protection Planners to Safeguard Your Wealth Against Civil Lawsuits
As you can see, there are several ways to protect your assets from a civil lawsuit. By deploying land trusts, corporate structures, and offshore trusts effectively, you can safeguard your wealth from a variety of financial threats.
To gain the strongest level of protection possible, you need to work with a professional. Asset Protection Planners has spent decades crafting ironclad asset protection strategies using the best tools possible. Using our expertise and experience, we’ll create a custom strategy that will keep your assets safe.
Protect your assets from civil lawsuits today by scheduling a free consultation with one of our team members.
Protect Your Assets From Civil Lawsuits FAQ
How do I protect my assets from a civil lawsuit?
You don’t have to become a legal expert overnight to protect your assets from a civil lawsuit. You just need to carry out a series of practical, well-timed steps that help put your belongings beyond the reach of creditors.
The first step in this process is always to hire a professional or a team, like Asset Protection Planners, with decades of experience setting up asset protection strategies. These pros can help you establish an asset protection plan that is likely to stand up to anything a creditor can throw at it.
Next, have your planner explore various asset protection options. Notably, you’ll want to have them explain land trusts, insurance options, LLCs, and offshore asset protection trusts. They’ll tell you which of these tools makes sense for your situation.
Finally, once you’ve decided on a strategy, let your asset protection planner establish every tool that is going to be a part of your strategy. By the time they’re done, you should have an ironclad plan that will protect your assets from a civil lawsuit and countless other threats.
Here’s a step-by-step guide explaining how to protect your assets from civil claims:
- Hire an asset protection planner.
- Meet with your planner to discuss your current assets.
- Let your planner develop a strategy that can keep your belongings safe from a civil lawsuit.
- Have your planner explain various insurance plans, trusts, and corporate structures that will work in your favor.
- Max out your basic liability insurance (auto, homeowners, renters) with higher limits rather than barebones state minimums.
- Add an umbrella liability policy, usually in $1–5 million layers, to act as a shield in a big civil lawsuit.
- File any required homestead declaration so your primary residence gets the full protection your state allows.
- Have your asset protection planner set up an offshore asset protection trust.
- Ask for your planner to establish an LLC within the trust to further separate your assets from a potential threat.
- Regularly check in to get updates from your planner about how your plan has been maintained.
- If you are ever sued, contact your planner and follow their instructions.
