It’s not uncommon for people to mistakenly believe that asset protection is something only the very rich need to consider. The truth is that anyone, regardless of economic status, can be sued at anytime for pretty much any reason.
Do I Need an Asset Protection Strategy if I Don’t Own a Business?
I remember reading an article several months ago in which a homeowner was sued by her neighbor because her dog barked. The neighbor was claiming $500,000 in damages and the homeowner thought it so absurd that she disregarded the lawsuit and did not bother to file a response. The neighbor obtained a default judgment and started going after the woman’s assets — including her home.
The bottom line is that a car accident, unpaid medical bills, an injured tenant, a business dispute, an injured customer, or a myriad of other events can result in a money judgment that destroys the individual or business owner’s finances.
It’s important to note that there are various levels of asset protection and asset protection is part of an integrated estate plan. Asset protection planning is really about managing the risk to your personal and business assets from potential individual and/or business liabilities.
Business owners and real estate investors should start by taking a good look at their own business entity structures. Businesses and real estate are better held in separate entities rather than individual’s names in order to insulate the owner’s personal assets from business and/or landlord related liabilities.
How Do Asset Protection Plans Work?
Asset protection plans are designed to segregate high value assets from each other so that a liability arising in one area cannot compromise or put at risk the assets of another. For example, if a real estate investor owns ten pieces of property, any liability arising from a slip and fall lawsuit on one property should be contained within that property’s holding entity and all other properties should be insulated. Asset protection strategies are not bullet proof; however, they discourage frivolous claims and provide leverage for debtors to negotiate settlement with creditors on meritorious claims.
Various strategies can be used to protect assets, including, but not limited to, trusts, wills, insurance and other planning techniques. With respect to insurance, individuals should increase their auto insurance coverage, make sure their homeowner’s coverage is sufficient and obtain an umbrella policy if they don’t have one already. Business owners should have sufficient general liability coverage, product liability or professional liability coverage, if applicable, and employment practices liability.
If you have business or personal assets that are not protected, give us a call and let’s discuss the best strategies for asset protection based on your specific situation.
The information above is general in nature and is not legal advice specific to your situation. If you have questions about your business, estate plan, or protecting your business or personal assets, you should speak with an attorney in your area for legal advice. If you live or do business in California and would like to speak with The Law Office of Tawnya Gilreath regarding your situation, please schedule an appointment.