Why You Need Protection
The ultimate goal of asset protection is to give you and your family lifetime security – the comfort of knowing that you can't lose what you own; regardless of the financial or legal problems you may face. A good asset protection plan will also help you achieve other important objectives:
One objective of asset protection is to discourage lawsuits. To discourage lawsuits you must convince a potential plaintiff that they cannot seize your wealth.
Discourage lawsuits, and your asset protection plan shields you from the costs to defend against lawsuits. A lawsuit can cost you tens of thousands of dollars to defend, even if you win the case. You can spend an enormous amount of money, time, and effort to win a lawsuit. Prevent even one lawsuit, and you pay for your asset protection many times over.
A potential plaintiff must weigh the costs to sue you against the odds of winning and recovering based on your exposed assets. Are you even worth suing? Lawyers don't spend time on unproductive cases. It is not whether or not you have assets that determine whether you get sued; it's whether your assets are exposed. Avoid lawsuits. Convince a prospective plaintiff that your financial fortress is impregnable.
If you have good protection, you are in a far stronger position to negotiate a fast, inexpensive settlement. You negotiate from strength when your opponent knows you have nothing to lose and they have little or nothing to gain from suing. A good defense lawyer will sell the idea that you are judgment-proof and that the plaintiff should settle their case for those few dollars. Your goal is to settle fast and inexpensively. Avoid lengthy, time consuming and costly court battles.
Reduce Insurance Costs
A good asset protection plan will also save you money on liability insurance. We don't promote asset protection as a substitute for liability insurance, but insurance can be too costly for high-risk professionals and business owners. Asset protection can supplement or replace their insurance.
Insurance is costly (and it attracts lawsuits); nevertheless, it's invaluable for any risk management program. Make insurance your primary defense and asset protection your secondary safeguard. Convince the plaintiff to settle within the policy limits and forego further claims against you by having your assets well insulated.
Improve your Financial Planning
A good asset protection plan may also help you reduce your estate and income taxes, improve your estate plan, and possibly even grow your investments. Asset protection is an essential component to any financial plan.
The ultimate purpose of asset protection is to safeguard your wealth against the worst-case scenario – you are sued and lose. And the odds are that you will someday be sued. Your asset protection plan then faces its ultimate test. Your asset protection plan may prove its benefit only after the plaintiff wins a judgment and has exhausted every collection attempt.
Even with protection, every case has its settlement value. You don't want a judgment over your head for twenty or more years. Or a plaintiff may force you into bankruptcy. And a judgment against you won't improve your credit rating.
The success of your asset protection plan then is not whether you will avoid paying something if you are sued. You probably will. Your goal is not to lose significant assets.
Yes, You Can Lose Everything!
You may think that your wealth is safe and that you don't need protection. But don't delude yourself and accept reality — for every 60 minutes you spend making money, spend 60 seconds thinking about how to protect it!