As U.S citizens, we are living in a society with countless litigators. Even good people can be dragged to court due to unfortunate reasons.
You may have worked hard to build and maintain your family’s assets for a long time, however, just like sand held in one’s hand, it can all be lost easily if you don’t take appropriate measures.
Bankruptcy, creditors, and lawsuits are some of the ways that can make you and your family penniless.
Doctors, executives, and other professionals are not the only ones who should worry about protecting their wealth. The more wealth you have, the more likely it is for you to end up in a lawsuit where you might have to pay a hefty amount for compensation to another party.
One of the most common threats to family assets comes from losing a civil lawsuit. But how does one prepare for something like this? Your negligence can make you regretful in the future.
Here’s how you can gear up your defense:
#1 Insurance Always Has Your Back- Umbrella Policies
The higher risk exposure you have as a professional, the more you should invest in insurance that can cover all expenses on a rainy day.
An umbrella policy will make sure that you never find yourself in a civil lawsuit where you end up paying more than your current insurance coverage.
In short, if you fear your insurance coverage will fall short in bad times, you must invest in an umbrella policy that will cover all overheads.
How does this protect your family assets?
Imagine you are liable to pay $1.5 million in a claim for faulty products which resulted in a personal injury, and you only have $1 million. An umbrella policy will cover the additional charges so you don’t have to sell off assets or face the threat of plaintiffs seizing your family assets.
There are several other policies you can explore, but this one does the job of protecting your family assets pretty well.
#2 Jointly Owned Assets
You can consider placing a family member’s name along with yours on the bank account, investments, and properties.
When wealth is concentrated in the hands and name of just one person, there’s a high risk. It’s an easy target for creditors, as the process of seizing property and assets that are co-owned involves paperwork and other inconveniences they want to avoid.
When you have assets that are jointly owned with your partner or spouse, plaintiffs filing for malpractice, injury or any other civil case will not be able to seize jointly owned assets.
However, there’s another problem to consider. You may jointly own property with your spouse, but if due to unfortunate events, you end up in a divorce, you may end up risking it all.
#3 Retirement Accounts
Individual retirement accounts are offered high protection by some states in the USA. This means it is a safe place for keeping your family assets. Even in the case of bankruptcy or civil lawsuits, your funds in the retirement accounts will remain protected and will not be seized.
Hence, it’s often a safe bet to keep funds that you won’t be needing until retirement age in these accounts. Remember, if you withdraw money from these accounts before the time you might have to pay penalties, so make sure you only keep money that’s not needed in the near future in these protected accounts.
Speaking to an attorney to understand the exemptions and protections that are in place for IRA accounts in your state may be a good idea in order to avoid any complications in the future.
#4 Separate your Business Assets From Your Personal Assets For Protection Of Family Assets
As a business owner, financial risks are enormous. That’s why we suggest keeping your two streams of wealth separately. A hostility between partners or simple disputes could result in losses for you. Hence, it is important to create limited liability companies (LLC).
How does LLC work? Well, they guard your personal assets such as house, car, and bank accounts, against creditors or litigators. Even if your business goes bankrupt or gets sued, you can still manage to save your personal family assets thanks to LLC.
You may still face some financial losses, but they will not completely rob you of everything you personally own.
However, this does not free you of all accountability for wrong doings and negligence. For instance, if you personally injure another party you will still be liable for that.
Although it does not offer complete relief from liabilities, as a business owner, you must plan ahead and form an LLC if you want to keep your family assets safe from creditors.
The Takeaway: Always Plan Ahead
As long as you are in business, the threat of a civil lawsuit will be looming over you.
However, these strategies can offer partial, if not full protection, to your family assets in a civil lawsuit. Planning according to the worst-case scenario will always pay back.
But all these options are only effective if there’s not a civil lawsuit filed against you already. In that case, it may already be too late.
Meet with your family lawyer Chicago as soon as possible to explore all the options that are available for you. Don’t wait for bad days to come knocking on your door.