You’ve worked hard to build your success business, practice or career, so aside from protecting the assets you’ve earned, here are 7 reasons to engage in asset protection planning:
- Peace of Mind. Be able to run your business, practice or career without worrying about lawsuits or threats of litigation can be priceless and allow you to focus the day-to-day activities without disruption.
- Avoid Probate and Estate Taxes. Asset protection planning and estate planning go hand-in-hand, and as a result, a thorough, well-designed plan will help you avoid guardianship proceedings in the event of disability, and probate and estate taxes upon your death, saving you, yourself and your family money, time, stress and frustration.
- Reduce your Liability and Malpractice Insurance Costs. If your assets are protected, less insurance coverage may be needed. Some coverage will always be advisable, but cost of asset protection planning will likely be recovered within a few years due to the reduction in annual insurance premiums.
- Decreased Likelihood of Lawsuit or Threats of Lawsuits. When potential plaintiffs see that you have judgment-proofed your assets and have limited insurance coverage, they’ll be less likely to file a lawsuit or will drop it once they realize the likelihood of receiving a judgment is low.
- Protection Against Punitive Damages. Most insurance policies do not cover exemplary, treble or punitive damages. Plaintiffs’ attorneys are trained to look for ‘deep pockets’ and sometimes juries like to make examples of rich defendants by awarding large sums to poor plaintiffs.
- In Case Your Insurance Company Goes Bankrupt or Denies Your Claim. The unfortunate reality is, there’s no guarantee that your liability insurance company is going to be there when you need it, as we’ve seen in the last couple of years in particular. Or, your insurance company could look for loopholes or reasons not to pay your claim. Asset protection planning can be another line of defense of supplement your liability insurance.
- Bargaining Power During a Lawsuit. If you are sued, having an asset protection plan may increase the likelihood of negotiating a favorable settlement. When a creditor or plaintiff faces an asset protection plan, there are four potential outcomes, only one of which is good for the creditor: (1) They can settle for the amount offered by you or the insurance carrier; (2) They could lose the lawsuit and receive nothing; (3) They could win the lawsuit, but the award could be smaller than what was offered to settle the case; (4) They could win the lawsuit, but the due to the unavailability to assets that they can ‘attach’ the award to beyond the insurance coverage, it’s likely that it would take months or years of court proceedings and filings that the combination of high stress, frustration and legal bills coupled with a limited likelihood of recovering makes it unlikely that they will ever actually recover an amount greater than the insurance coverage.
Creditors realize that it’s in their best interest to settle for the amount offered by you or the insurance carrier, especially when they realize they’ll get their money a lot sooner. The unfortunate reality is that the concept of plaintiff’s attorneys working on contingency fee basis (i.e., the client doesn’t pay the attorney directly, instead the attorney takes a percentage of the lawsuit award or settlement amount) tends to create an “I have nothing to lose” attitude among plaintiffs. In contrast, most defendants must pay retainers and/or hourly fees to their lawyer to defend the lawsuit from the outset. Having an asset protection plan in place helps level the playing field by creating an incentive for the plaintiff to settle early thereby reducing litigation costs and time.
Want to learn more about asset protection planning? Call our office at 919-443-3035 to register for an upcoming seminar or schedule a Vision Meeting to discuss your planning and asset protection goals.