For Whom The Bells Toll: Asset Protection May Be For Everyone

Over the last few decades expanding theories of liability and the proliferation of

litigation has given increased emphasis for Asset Protection Planning to the extent that it is now a well recognized are of practice. We live in a victim oriented society where aggressive plaintiff lawyers are always trying to find the "deep pocket". There is an increased media and society awareness of large plaintiffs' judgments and a high notoriety for mal-practice and other errors and omissions types of lawsuits. Obviously, there are individuals who are more at risk such as professionals like physicians, dentists, lawyers, CPAs, architects, engineers, etc. Business owners and any individuals dealing with investors also face tremendous liability exposure. A seller of a business has to worry about a purchaser with buyer's remorse who can sue for fraud, misrepresentation and failure to disclose. Many business owners and real estate investors have to sign personal guarantees in order to carry on their business activities and purchase their real estate assets. Anyone who owns a boat, an airplane or an extreme vehicle faces tremendous liability potential. Individuals with high risk businesses such as waste refuge or recycling are concerned about environmental claims liability.

All of these types of individuals generate terrific liability exposure. But what about the non professional or non business owner - the average individual who is not engaging in a liability related activity? Does the average person really need Asset Protection Planning?

Recently I met with a retired couple who have a very nice home here in Southern California completely paid off, reasonable pension and IRA assets and a little over $250,000 in cash and marketable securities. They had a California Revocable Living Trust, but really didn't think there was any reason for them to worry about Asset Protection Planning. However, a few weeks before our meeting, the wife had been involved in a major automobile accident, the result of which one of the passengers in the other car was permanently paralyzed. The couple was now facing a lawsuit of several million dollars. Their insurance coverage was limited to $500,000. Their entire savings and their beautiful home are now at risk. Who would have thought?

A few weeks ago I met with another couple who own a small family business that is reasonably profitable and provides both of them with good income. The business is involved in the distribution of non high risk products, but my clients were still concerned about potential liability from various sources dealing with their business. They also were concerned, however, about personal liability with respect to normal every day activities like owning and operating automobiles, utilizing their power speed boat and other activities that they engage in at their vacation home on a recreational lake. As we discussed their exposure situation, they related to me that they had often talked about their potential risks and they were very excited that I was able to address their concerns and structure a plan that would afford them much more protection that they otherwise would have had.

The point is, of course, that everyone needs to think about Asset Protection Planning. Most people need to review their liability and umbrella insurance coverage. Real estate should be transferred to limited liability companies. Consideration should be given to transferring personal residences to Domestic Asset Protection Trusts. The facts are, that most individuals who have assets at a value approaching one million dollars or more need to carefully consider an Asset Protection structure. The structure does not need to be that complicated for smaller estates, but Asset Protection has to be addressed and reviewed by almost everyone.

Copyright (c) 2010 Jeffrey Matsen

by: Jeffrey Matsen

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