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ASSET PROTECTION

WILL YOU BE A LAWSUIT TARGET THIS YEAR?

The USA is home to over 75% of the world's lawyers and 90% of the world's lawsuits.  One out of every ten people in the U.S. will be involved in a lawsuit, and if you're a business or property owner your chances go up considerably to one out of three.
 

Why So Many Lawsuits?
The question naturally arises "Why?"  Some say it's because we don't spay and neuter trial lawyers, and that's why they're overpopulated.  Others blame it on the American cultural penchant for blame and finger-pointing over life's unfair outcomes. Whatever the reason, it just makes sense to reduce the risk of being served with a lawsuit, and to increase your protection to survive one with your financial life still intact.
 

Reducing the Risk of Litigation
Most lawsuits involve "tort" claims, such as breach of contract, intentional harm or negligence.   If you own rental property, own a business, have teenage drivers, coach a team, or have accumulated assets, you're a likely target.  These are "lawsuit magnets."  Consider ways to reduce the likelihood of being in a lawsuit.  For example, rental property owners should keep their properties well-maintained and safe from risks.  Business owners should pay attention to customer service and financial disputes, adding arbitration or mediation clauses in contracts to resolve disputes before they ever become lawsuits.

Ask your insurance carrier, family and employees to help conduct an internal audit of your risk management practices to uncover hidden risks and help you design practical mitigation.  The saying is true - "An ounce of prevention is worth a pound of cure."

Increasing Your Liability Protection
Being proactive to reduce your risk of lawsuits is just a first step.  The next is to remember that sometimes no matter what you do, you can still be a lawsuit target.  Most of us believe we are not likely to be sued because we're nice people, we try to raise our kids right, we're faithful to our religious beliefs, or because we try to avoid risky behavior that might harm others.   So what can the average person do to increase their level of protection?

• Start with adequate liability insurance.  Ask your agent about the types of claims you're most at risk for, what your policy actually covers and just as importantly, what it does not cover.  Look at the size of jury awards being rendered for those risks. 
   

• Next, see if an "umbrella policy" can be added to your homeowner's coverage.  An umbrella policy is an inexpensive supplement that just might come in very handy if (when) you're sued.  Some offer coverage of a million dollars for about $250 to $350 a year.
   

• If you are a "sole proprietor" or "joint venture" business owner, you are walking around with a target on your back that says "Kick Me."  Not only are sole proprietors the most tax-audited business owners, but they are also most at risk.  Because the sole proprietor and the business are considered "one-and-the-same" under the law, you are personally liable and can lose everything.  Consider forming a corporation or a limited liability company.
   

• If your business is already in a corporation or a limited liability company, get help to ensure you meet the standards of "compliance" so your company provides the first layer of protection from unknown future lawsuit predators.
   

• Many trial attorneys try to "pierce the corporate veil" by claiming companies aren't observing corporate formalities or by applying the "alter ego" doctrine, asserting that you've conducted yourself such that the court should ignore the existence of the company entity and hold you "personally liable."  To avoid this, don't commingle personal and business expenditures.  Observe corporate formalities of board meetings and minutes.  Take reasonable compensation and pay personal expenses with personal, not business funds.  
   

• Start developing a step-by-step plan to acquire business credit in the name of your company itself, distinct from your own personal credit, since this will help your business grow stronger and at the same time reinforce the defense that you and your business are not one-and-the-same.  With guidance, you can establish credibility and stand-alone financial power in the name of your company that will not only create lines of credit for your business to expand, but reduce the strain on your personal credit .

• Your company should adopt a "qualified" retirement plan such as a pension or defined benefit plan.  Even a one-person company can adopt a "solo 401(k)".  Current law protects funds inside of qualified retirement plans from being subject to creditor claims.

In the end, protecting yourself from a lawsuit is not solved by waving a magic wand or by just hoping you'll avoid becoming a target.  Take it upon yourself to seek out help in establishing a corporation, limited liability company, limited partnership and a qualified retirement plan.  Every step you take now in reducing risk and increasing your protection is a step closer to enjoying a safe and comfortable retirement, having safeguarded your accumulated wealth.
 

When it comes to "asset protection" feel free to make an appointment with us, so we can help you to safeguard your assets.