What Could Happen If I Do Not Have a North Carolina Asset Protection Plan in Place?

Jackie Bedard
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When some of our clients at Carolina Family Estate planning first hear the words “asset protection,” they think that it doesn’t apply to them or that they don’t have enough assets to need an asset protection plan. However, the mega-rich are not the only ones who can benefit from a sound Asset Protection Plan. In fact, families from all walks of life can protect their North Carolina assets and their loved ones from potential curveballs that life might throw their way.

To demonstrate how a Cary, NC asset protection attorney can help protect you and your family, here are few hypothetical scenarios:

Scenario 1

Bob and Susan have two college-aged, unmarried children who live out of the home. They have outlined in their Will that their assets would first pass to each other and then the children are to inherit all of their assets and divide it equally, including a paid-off home worth $250,000, two cars and cash and stocks worth an additional $100,000.

Bob passes away, leaving everything to Susan. They’d been married for years and the loss of her husband leaves her pretty distraught. One afternoon, while out driving, she becomes a bit distracted and causes a major car accident in which the driver of another vehicle is left paralyzed from the neck down.

The other driver sues Susan. Like most people, Susan had relatively minimal auto insurance coverage—enough to cover a run-of-the-mill fender bender, but not enough to adequately compensate the paralyzed plaintiff. As such, the plaintiff makes a claim against all of Susan’s assets (including everything that Bob left to her). Susan loses almost everything to the lawsuit and at the end of the day, there’s not going to be anything left to pass on to the children.

With an asset protection plan, Bob and Susan’s attorney could have ensured that at least a significant portion of their assets was protected from such a scenario through a combination of certain tools such as trusts, insurance, and assets-types that are protected by federal law.
 

Scenario 2

Ruth, a widow, leaves her life’s savings, home, vintage cars, and stocks to her only son, Rick. After Ruth’s passing, Rick receives a total inheritance of almost $500,000. A year or two later, Rick’s wife files for divorce. During the divorce proceeding, she files a claim for half of everything—including Rick’s inheritance, some of which they had used to pay down their mortgage, purchase new cars, and similar.

If Ruth had instead left everything to Rick in a lifetime asset protection trust and explained to him how to helps to protect his inheritance, Rick would not have been left facing the possibility of losing half of his inheritance in the divorce proceeding.
 

Scenario 3

Tom is a local business owner that runs a popular franchise. The business generates a nice steady income to support Tom and his family. One day, Tom and his wife, Marlene, hold a graduation party at their home to celebrate their son’s college graduation. During the party, the kids are horsing around and one of the guests gets pushed into the pool, hitting his head on the way down and is left paralyzed. The boy’s family files a “premises liability” lawsuit against Tom and his wife, as the homeowner’s. The boy’s family wins a court judgment of $3.5 million—but Tom and his wife don’t have $3.5 million sitting in the bank. So the family of the paralyzed boy instead sues for ownership of Tom’s business--the business that he built from the ground up and that provides for his family

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To learn more about common estate planning issues, check out our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family's Future, or to discuss your estate planning concerns, please call our office at 919-443-3035 or use our contact form.