How does asset protection discourage lawsuits?
The most effective way to discourage litigation is to convince a potential plaintiff that you have no exposed wealth that they can seize even if they sue and win their case. By discouraging litigation you avoid the time, hassle and expense of defending against the lawsuit. Isn’t it better to discourage a lawsuit than to be forced to defend against the lawsuit and spend huge legal fees, time, and effort to ‘win’? If you prevent even one potential lawsuit, you pay for your asset protection plan many times over.
Litigation is economics. A plaintiff’s lawyer evaluates the case against you and weighs the cost of suing against the odds of winning. The lawyer then factors in the likely recovery based on your exposed assets. Essentially, the lawyer decides are you worth suing? Few sensible plaintiffs sue when they cannot foresee recovering enough to make the lawsuit worthwhile. Of course, you may nevertheless get sued because even a shaky lawsuit has some ‘settlement value.’ Most people will pay something to make their lawsuits disappear. This legal ‘extortion’ is one reason people dislike lawyers and litigants; nevertheless, it’s reality. It’s ‘part of the game.’ People also sue ‘vindictively’. They have a score to settle. There are other reasons why even those well-protected get sued. You may be a peripheral defendant in a lawsuit. Your assets aren’t investigated because you’re one of many defendants. But as a rule, it’s not whether you have assets that determine whether you get sued; it’s whether you have exposed assets. To avoid lawsuits, you must convince a prospective plaintiff that you have that impregnable financial fortress and they have nothing much to gain from suing.
Whenever one of our clients is threatened with litigation we try to ‘sell’ the adversary on the fact that our client is well-protected. We don’t use an ‘in-your face’ approach, but we do quickly let the adversary know that even if he sues and wins, he has little chance of collecting. Why spend years in court only to end up empty handed? It usually works. Most legal threats then vanish or are quickly and inexpensively resolved. Lawsuit avoidance is a major part of our practice.