Asset Protection FAQs
We are pleased to provide a full suite of asset protection planning services that are second to none. The attorneys and staff at the Speiser Law Firm, P.A. are uniquely qualified to evaluate and recommend strategies in a wide variety of circumstances. We encourage you to reach out to us and let us help you evaluate your planning options.
What is Asset Protection?
Asset protection describes any type of planning, whether for personal or business reasons, that has the effect of shielding your assets from unanticipated creditors.
For a more complete explanation, we invite you to read Stephen Speiser's article, "What is Asset Protection":
Is Asset Protection Really Necessary?
Yes. One of the greatest mistakes a person can make is to assume that, because one is honest and ethical in their personal and business dealings, they will not be sued. Unfortunately, this is often not the case.
Our legal system imposes liability for many situations over which we have little control. For example, if you own rental property, your tenant has possession of the property and you, as landlord, have very little control over what occurs or who comes and goes on a daily basis. Nevertheless, if someone were to get hurt on your property, YOU will be named as the defendant since you are the owner.
Another mistake people make is to assume that, because they are acting as an officer of a company, they cannot be personally sued. This is NOT true. If an LLC you manage is sued for negligence, fraud, misconduct, or violating a statute, you may face personal liability as the LLC manager. Likewise, if you are driving a company car on company business and cause an accident, the company is liable – but so are you. YOU were the negligent driver.
What Can I Protect?
Nearly every asset you own can be protected: cash, stocks, bonds, money market accounts, insurance policies, annuities, real estate, equipment, machinery, tools, patents, trademarks and other forms of intellectual property, mortgages and notes owed to you, etc. There is very little that cannot be protected with proper planning.
If I Have Insurance, Do I Still Need Asset Protection?Yes. Insurance should be your “first line of defense,” and having insurance may enable you to more flexibly protect assets from creditors. However, insurance should NOT be your only defense:
- Uninsured Liability. 70% of lawsuits are NOT covered by insurance. This is a statistical fact. Ony 30% of all lawsuits filed in the United States are covered by insurance policies.
- Exclusions (Read the Fine Print). When you get an insurance policy, it can be 50+ pages long. The first page is called the “Declarations Page.” It is a summary that tells that you what you’re covered for and for how much. What do you think pages 2 through 50+ tell you? Often, it is the fine print listing all the exclusions from coverage.
- Policy Limits (Coverage May Be Inadequate). Very frequently, an insurance policy is written for an amount that is substantially less than the amount of the plaintiff’s damages. For example, if you are in an auto acident and your policy is a $100,000/$300,000 policy, it means that the insurance company will only pay up to $100,000 per person injured (with $300,000 in the aggregate if there is more than one injured party). Depending on your policy, that $100,000 can be further reduced by the amount of legal fees the carrier has to pay out to its attorneys. If that is the case, attorney’s fees, court costs and expert witness fees can easily exceed $100,000 if the case goes to trial. Does that $100,000/$300,000 policy still sound like reasonable coverage? Any damages awarded to a plaintiff in excess of $100,000 (per plaintiff) is not insured, but is instead your responsibility.
- Notice of Claim Denials. An insurance policy is a contract between you (the insured) and the insurance company. Whenever there is a serious claim with substantial damages, the insurance company will ask its attorneys to review the facts of the case and the policy to see if you have complied with all of the technical contract requirements. If you have not (in other words, you are considered to be in breach of the contract), the insurance company can issue a notice of denial and reject coverage under the policy. This happens more often than people realize. For example, you are in an auto accident. It’s a simple fender bender and you don’t think anyone is hurt. You agree to pay for the the damage you caused to the other car if the driver agrees not to file a claim. You shake hands. You pay for his auto body damage. You think the case is closed. One year later, you are served with a lawsuit. The other driver now claims he sustained serious personal injuries in the crash. You submit the claim to your carrier. They reject your claim because you did not notify them within the timeframe specified in your contract of insurance. You are on your own.
- Gaps In Coverage (Multiple Policy Risks). Business owners know that they need insurance and rely on their insurance agent to advise them on what policies they need. Oftentimes, a business owner will have multiple policies: Auto insurance; workers comp insurance, commercial general liability insurance, etc. They pay the premiums and then throw the policies in a draw and never look at them. They think they are covered for everything that they might reasonably need. Every year, the insurance companies issues endorsements that add to or subtract from what is covered under each of these policies. The problem is, who reads insurance policies? Who reads endorsements that are issued every year? Usually there are uninsured gaps between the policies. If a construction defect claim is filed after the project is complete, will the builder’s risk policy pay for it? Typically not. The umbrella policy? No, because it does not cover business risks. You get the point.
- Common Misconceptions About Business Insurance. Business Policies do NOT cover:
- Fraud/Willful Violation of Law
- Intentional Misconduct & Reckless Conduct
- Business Disputes, Partnership Disputes and Other Financial Risks
- Personal Profit or Advantage Exclusions Exclusions
- Insured vs. Insured Exclusions
- “Laser” Exclusions: (eg., S.E.C., discrimination, sexual harassment, etc.)
- R.S. Assessments
- Punitive Damages
Remember, insurance companies are in business to make a profit, not to pay claims. They spend a lot of money on lawyers to limit their exposure. If the policy pays the claim, that is swell. However, if the insurance company declines coverage, there is nothing standing between you and financial ruin except your asset protection plan.
Where Do I Start?
We always start the process with personal asset protection planning, which involves protecting the assets which belong to you and your family (cash, stocks, bonds, personal property, and ownership interests in real estate and businesses). The reason we start with personal asset protection planning is simple: If an attorney can get to YOU, they can generally get to everything you own, including your business assets.
Once we have secured your personal assets, we turn to business asset protection planning. We specifically look to determine whether your business is properly organized to withstand a direct first-party claim against the company. In other words, we analyze the extent to which your business and its assets (including real estate, inventory, equipment, machinery, cash, and accounts recievable) may be exposed to litigation.
Can Asset Protection Help Influence the Outcome of Litigation?
Definitely. It is one of the primary benefits of asset protection planning. A well crafted asset protecton plan can have the following effects on litigation and the willingness of the parties to settle:
- It Can Prevent Predatory Litigation. Whatever you may think of contingent fee attorneys, they will not take a case if they believe there is little hope of collecting on a judgment. Even a plaintiff who is paying their attorney by the hour will not want to spend money on legal fees if he cannot collect on a judgment. Someone who does not have the readily available means to satisfy a claim for damages is described as "judgment proof." A well constructed asset protection plan may effectively render an otherwise wealthy defendant “legally judgment proof.”
- It Can Produce A Favorable Settlement. For the same reasons that an asset protection plan can prevent litigation, it can also produce a quick and favorable settlement. Settlement discussions usually occur at least twice during a lawsuit. First, after the lawsuit is filed, the attorneys will usually have a preliminary settlement conference to see if the matter can be resolved before significant time and resources are spent by the parties. Second, before a case goes to trial, the trial judge may refer the case for mediation. At either point, a well-crafted asset protection plan can lead to a settlement for “pennies on the dollar.”
- It Can Shield Assets From Judgment Creditors. Even if a plaintiff is determined to follow through with a lawsuit, the resulting judgment will be worthless if the plaintiff cannot collect. A judgment is only as effective as the plaintiff's ability to collect on that judgment. An effective asset protection plan encourages the plaintiff to reach a modest settlement in light of the anticipated difficulties of collecting.
- Psychological Leverage. A well-designed asset protection plan shifts the psychological leverage in favor of the defendant. Normally, a plaintiff’s attorney performs a risk assessment to decide if the case can be won. An effective asset protection plan, however, introduces a second variable for plaintiff's counsel to consider: No longer is winning enough. Now, the plaintiff's attorney must also assess the prospects of successfully collecting on a judgment. This second variable can be devastating to the willingness of an attorney or a plaintiff to take on a case.
- The Speiser Law Firm Strategy. The Speiser Law Firm Strategy is to set up an asset protection plan that, within the bounds of what is available under the law, makes it as difficult, as time-consuming, and as expensive as possible to sue our client.
I Have Already Been Sued... Is it Too Late to Engage Your Firm?
Asset protection planning is best accomplished when you are not subject to claims or litigation. Nevertheless, many clients come to us after a significant liability event has occurred, many times having been turned away by less-experienced lawyers who are unfamiliar with post-claim planning. While the presence of a claim may limit your planning options, in most cases there are many valuable opportunities still available. It is therefore imperative that you contact us as soon as possible.
Are Your Asset Protection Plans Bulletproof and Guaranteed to Work?
No lawyer or law firm can guarantee that a given asset protection strategy will withstand every conceivable challenge. A more reasonable expectation – and what we can represent – is that a well-crafted asset protection plan will make it much more difficult, much more expensive, and much more time-consuming for a creditor to collect on a judgment. In turn, this increases the likelihood of a settlement on favorable terms. For this reason, we generally favor a layered asset protection structure with multiple legal defenses that a creditor must penetrate in order to reach your assets.
The greater the degree of difficulty, the greater the likelihood that a creditor will be willing to settle for pennies on the dollar. This should be the goal of every asset protection plan.
Will A Living Trust Protect My Assets If I Am Sued?
No. While a properly structured living trust can provide privacy and avoid the probate process, it provides no protection from your creditors. A living trust is a revocable trust. You can take assets out of the trust whenever you want during your lifetime. It is an estate planning tool, not an asset protection tool. The trust's assets are available to your creditors.
Will A Land Trust Protect My Assets If I Am Sued?
No. A land trust is a revocable trust and only helps to remove your assets from the public record. It provides a measure of privacy because the real estate is titled in the name of a trustee (i.e., someone other than you). Nevertheless, it provides no protection from your creditors, and your interest as a beneficial owner is subject to creditor seizure.
Do I Have to Put My Money Overseas to Protect It?
Not necessarily. The foreign asset protection trust is one of the most viable, time-tested techniques for protecting one's wealth, but it is not appropriate in every situation. We evaluate your specific situation and make recommendations appropriate to the types of assets being protected.
Do I Have Enough Assets to Justify Asset Protection Planning With Your Firm?
This is a common question. The answer, surprisingly, is that the smaller the size of one’s holdings or estate, the greater the need for asset protection planning. The reason is because a client who is worth, say, $10 million would be angry and upset if they lost a $1 million jury verdict, but in truth it would not have a great impact on their standard of living. A client who is worth $1 million, however, would be wiped out and would have great difficulty recovering from such a loss.