Do You need Asset Protection? By Rajesh Jyotishi
BY RAJESH JYOTISHI, CEP, CSA
It is estimated that we have over 800,000 attorneys and 50 million civil lawsuits each year. Every 3 seconds somebody gets sued. For individuals who are in the high income, high net worth positions, the risk of being used is even greater. Today, many people view lawsuits like a lottery ticket. It's worth a gamble if they can get some easy money.
For the defending parties, it is a no win situation, because when someone sues you, you have to take the time and money to defend yourself.���It is not surprising to hear people say that "I can't afford to win anymore lawsuits".���Your liabilities can come from many places. From your children, business partners, rental properties, as well as your profession. Many times, the settlement amounts can be in millions.
So what can you do?
Here are some general guidelines and suggestions for protecting your assets.
1. Carry an Umbrella Policy: An umbrella policy increases your liability protection on your car, home and some other specific things. A typical auto/homeowners policy have limits of only $100,000, but an umbrella policy can be used to increase the liability coverage from $1,000.000 as much as $10,000,000. Consult your insurance agent on specific policy coverage and limitations.
2. Carry Professional Liability Insurance: Most professionals already know about this. For many physicians, professional malpractice insurance is one of their biggest expenses they have to pay. Many physicians pay well over $100,000/yr for their malpractice insurance depending on their specialties.
3. Use Corporations and Limited Liability Companies: Proper use of business entities to hold commercial real estate, businesses and other assets can help isolate the liability to that venture. When you own assets in your personal name, you increase exposure to your other assets if and when trouble rises.
4. Consider Family Limited Partnerships and Irrevocable Trusts: For individuals with significant assets and potential estate tax liability, Family Limited Partnerships, Limited Liability companies and certain types of trusts can be an excellent means of reducing estate tax liability, providing asset protection for yourself as well as for your children, who may be the beneficiaries of your assets.
Keep in mind, our children may also need protection from divorces, bankruptcies as well as lawsuits. You probably wouldn't want your hard earned wealth lost to a divorce of your son/daughter after your passing. A well designed plan can also help control spending habits of your spendthrift beneficiaries. They say most estates are squandered within 3 years, liken to a lottery ticket winnings that come with no real effort.
5. Plan Early: Just as you can't practice fire prevention after a fire has begun, nor can you plan asset protection after a problem has begun. Fraudulent conveyances laws are pretty strict. With proper planning, you can head off many of the problems before they arise.
6. Get Professional Help: A good estate planning Attorney who specializes in asset protection can help with the proper design and implementation of your estate plan and asset protection needs. Keep in mind, documentation is just one step in the process. Proper operation of your trusts and entities is just as important. You may also want to get second opinions when necessary.
This article is to provide general information and it is not intended to provide legal advice. You should consult your legal and tax advisors before taking related decisions.
Moneywise is hosted by Rajesh Jyotishi with Shalin Financial Services, Inc. A Registered Investment Advisor. For questions, he can be reached at (770) 451-1932, or email at email@example.com
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