In past articles I’ve discussed some key reasons to try to protect your assets – namely, protection from the cost of estate taxes and long-term care.  However, there are other less widespread but nevertheless important events and situations in which you need to try to protect your assets.  These include bankruptcy, litigation, and divorce.

Attorneys such as myself look at each of these events and try to figure out how we can minimize the financial damage these events could cause our clients.  For example, if you are single, or married for 40+ years, the odds of divorce are pretty slim.  But the odds of any of your married children getting divorced may not be so slim.

Keep in mind that no asset protection plan is foolproof.  The success depends a great deal on the facts and circumstances surrounding each client.  As an extreme example, assume a client is a doctor who performs surgery while intoxicated and seriously maims a patient.  If this case gets to a jury, expect a large payout.  And don’t expect any sympathy from the injured party attempting to enforce the judgment.  Then there is bankruptcy, where the court has tremendous power and where the definition of “bankruptcy estate” is extremely broad.  In short, anyone promising you an asset protection plan that is bulletproof and foolproof is just hoping that you’re the fool.

Now, there are limited things that you can do to protect yourself against bankruptcy, and I’ve spoken about divorce in a number of previous articles (and will probably speak about it again in the future).  So for now I’d like to focus on possible litigation.  But how do you know if you’re a target for litigation and need to engage in some asset protection?  There are several ways to answer that question:

First you need to consider whether you are in a line of work that attracts a high degree of litigation. While we all face the possibility of litigation, some professions are more likely to be targeted than others.  Naturally, doctors and other professionals are at a higher risk, but so are certain manufacturers or people in construction.  Some other targeted areas are people who work in the oil and gas industry or commercial property owners.

A second group of people are those who are just wealthier than average and other people try to take advantage.  Once an individual reaches a certain income and/or asset level, they naturally become a target.  Obviously, “wealthy” is a relative term, but anyone who has over $1 million in assets and/or $200,000/year in income should consider some level of asset protection to protect their nest egg.

A third group would be any business with assets over $1 million.  The owner should have an attorney look at their structure and operations to minimize liability.  Too many of these companies are just in the owner’s name or a partnership with just a handshake agreement.  While these types of companies may be simpler and easier to run and maintain, they are easily open to litigation.  And that litigation can easily flow back to the owner’s and partners’ personal assets.

Both personal assets and businesses can be structured to maximize your protection.  This is typically done through correctly titling your personal assets or putting them in various types of trusts.  Your business can be structured into a limited liability company (such as a LLC, PLLC or PC) or a corporation to shield various parts of the company and shield your personal assets from the company.

To discuss how to best protect your assets, please contact us.