Lawyer Reveals Ways to Protect Assets From Lawsuits
In Florida, a man serving 12 years in prison for manslaughter for killing a person while driving drunk is suing his victim's survivors for the pain and suffering he is experiencing in prison.
Just as surprising, a mother in Illinois is being sued by her two daughters, now in their 20's, for bad mothering while they were teens, including setting curfews, arguing over clothing prices and not sending care packages while they were in college.
Even more frequently, the seller of a business is revisited two or three years later by the buyer who could not maintain the business. The buyer tries to find a way to sue the seller by blaming him for his business failure.
“You have these types of cases all the time,” says Hillel L. Presser, a lawyer specializing in domestic and international asset protection planning and author of Financial Self-Defense (www.assetprotectionattorneys.com.) “Even if the person being sued wins the case, there are no real winners because he could end up spending thousands of dollars in legal fees.”
“I had one case where a jet skier ran over a snorkeler. He had a $3 million umbrella insurance policy, but the insurance company refused to settle for the $800,000 the snorkeler asked for. The jet ski driver ended up losing $4.5 million and he had to turn around and sue the insurance company. The only winners here are the lawyers," Presser says.
It is not just the wealthy who find themselves the defendants of frivolous law suits, although the rich make easy targets, says Presser, who represents nearly two dozen professional athletes but lectures to audiences of all economic status.
“If one of my athletes who has $50 million gets sued for $5 million, he still has $45 million left. But if a person with $200,000 gets sued for a million dollars, he is wiped out,” Presser says.
“It is the duty of financial advisors to warn people to protect their assets. There are a number of measures that can be taken to protect yourself from being sued. If the financial advisor fails to do that, his client can lose his money and the advisor loses a client,” the lawyer warns. “For every 60 minutes a person spends making money, he should spend 60 seconds thinking about how to protect it.”
The first step is to inventory a client's assets. Many people own more than they think they do, including such things as intellectual property rights, Presser says.
Presser says advisors should know professionals who can help with asset protection and refer their clients to them. The professional should know federal state laws on asset protection, he says.
In some cases, assets are automatically protected from lawsuits. For instance in Florida, houses and life insurance are protected.
Only assets that are exempt from lawsuits should be in the owner's name. All other assets should be titled to corporations, limited partnerships, domestic trusts and other entities that offer protection.
Another tactic is to make assets valueless. “Take out a $2.9 million mortgage on your $3 million house and use the money to establish a trust. It is easier to protect liquid assets than property,” he says. “Make yourself unattractive to sue.”
Presser notes that he is not advocating anyone do anything illegal. None of the actions are taken to avoid paying taxes or to hide assets in a divorce. If assets are held internationally, all required reporting should be done.The goal is to make yourself or your client an unattractive lawsuit target by putting as much as possible under another entity rather than in your personal name. That way the owner can enjoy the asset but not be at risk of losing it.
“There more assets you have exposed, the more enticing a target you become, and the less money you have the more catastrophic the outcome can be,” Presser says.