Protecting Your Nest Egg from the Vultures?

[OAG]

Quote:

Originally Posted by Finance Dave My insurance carrier required that I increase my auto limits before they'd let me have an umbrella. I'm in Indiana and have Prudential.

The same here (USAA). When living in FL I took out a Umbrella policy and they required the Liability of the Home and Auto Policies be increased to, I think, $500K each before issuing the UP.

[Da Nag]

Quote:

Originally Posted by Martha Nearly all 401(k)s have complete protection from creditors under ERISA, no matter how much money is in the plan.

Hmm...a rank amateur here, but this raises a question of great interest to me.

I'm fairly certain most, if not all of our ER income will be well protected. 401k, 401a, 457b and our pensions are pretty much untouchable in Washington State, from the little research I've done on the subject. Needless to say, this gives me significant warm fuzzies.

However, there seems to be some consensus that rolling over some/all of these plans to IRAs can make financial sense. And in our case, this would be required if we set up 72T withdrawals...an option I'd like to see remain on the table.

So, the above is the long-winded way of asking the following - do IRA rollovers jeopardize any protections I'd have otherwise?

[two4theroad]

My question is this: If I purchase an Umbrella policy for $1m to protect my assets, what keeps the vultures from suing for $2m to get my insurance co. to pay $1m and me to pay the other $1m from my hard earned retirement money?

Also as an aside,
I have been getting quotes for an umbrella policy and use USAA for my auto coverage. Their quote was exactly the same as my homeowners policy quote for all coverage options.
They both require $500,000 min liability on house and cars and $250,000 on boat. They are both quoting from the same carrier Is this normal?

[FinanceDude]

Quote:

Originally Posted by Martha I am with those who suggest the umbrella policy on top of your regular liability policy. We have had several threads discussing whether having your assets in an "asset protection trust" or a "family limited partnership" is a good idea. I have said that they are not bullet proof ways to protect assets from creditors, but at least do put one more barrier between your assets and potential claims. It is something to think about anyway. Knowing what assets are exempt from creditors in your state of residence is also helpful as you can maximize those exemptions. When I was a bankruptcy trustee I saw over the years people file bankruptcy due to personal injury claims against them arising out of car accidents. Most of the time the claims were pretty small. The problem generally was that the debtor had no insurance or the bare minimum. Oddly, more often it was the debtor who had a personal injury claim against someone else and as a result of getting hurt, couldn't pay their bills. Sometimes I had to follow up on these claims. Generally I ended up settling with insurance companies.

Martha......... NICE AVATAR!! I don't need any explanation.........

[Martha]

Quote:

Originally Posted by Da Nag So, the above is the long-winded way of asking the following - do IRA rollovers jeopardize any protections I'd have otherwise?

If you file bankruptcy, the rollover IRA is fully protected if the money came from a 401k, or 457b. I am not absolutely sure about the 401a, I haven't looked it up.

If you don't file bankruptcy, then the protection of the rollover IRA is governed by state law. Some states provide full protection, many limit protection to the amount reasonably necessary for your and your dependents support, other states place a dollar limit on the amount protected. There might even be a few states that give no protection.

So, if things get bad and you have a big rollover IRA you might end up filing bankruptcy to protect it from creditors.

[pedorrero]

Lively thread.... For those interested, I'd recommend a few layman's guides. I have the PC (Cd-rom) version of Made E-Z "Asset Protection" which covers much of what's gone before in this thread. I was concerned at the time (because I was considering marriage, a risk to one's assets all its own.) I'm pretty low risk -- retired, not an OB-GYN, don't drink and drive ("any more"). Most of "my" income comes from a family trust (not my choosing!).

Some things I didn't see mentioned, by the way:
Trusts -- many flavors, must be done right or you're screwed.

Retirement Assets -- mentioned, but protection can vary enormously by State. Sometimes as simple as buying the otherwise-disreputable variable annuity.

Homestead (your home) is all but untouchable in many States -- also varies enormously.

Florida has many of these attributes, perhaps due to the large number of old farts here in God's Waiting Room its popularity as a retirement haven.

Pay your taxes, and don't buy investment land that turns out to be a Superfund site, and you should do acceptably.

Finally, please consult with a legal or financial professional before committing to a change. Asset protection, or even plain estate planning, is really one place where trying to do it yourself can really *&$# things up.

[MJ]

How would you get an umbrella policy when you don't own a home or car to insure?

MJ

[wolfbay]

I'm recently retired but years ago set up a family limited partnership and an offshore account because I'm so paranoid of lawyers{if they really are out to get you maybe it's not paranoia]I've never been sued but it helped my peace of mind.From one of the posts it sounds like it can be pierced anyway. I'm glad I didn't know that before.Ignorance is bliss.

[Spanky]

Quote:

Originally Posted by wolfbay ... I'm so paranoid of lawyers{if they really are out to get you maybe it's not paranoia]I've never been sued but it helped my peace of mind.From one of the posts it sounds like it can be pierced anyway. I'm glad I didn't know that before.Ignorance is bliss.

Lawyers can be your friends also according to the profession: "Lawyers take a lot of heat from the general public. People sometimes see lawyers as evil or detrimental to society. However, most of the time this is only because people are judging lawyers based on a lack of knowledge of the legal system and all the work that goes into it. The truth is, when you are in a bind, a lawyer can be the best friend you have."

They claim that they have helped victims of Vioxx to achieving justice.

[audreyh1]

Quote:

Originally Posted by MJ How would you get an umbrella policy when you don't own a home or car to insure? MJ

I think you still can. They just require some minimums on home and car insurance - if you own them. Talk to your (or an) insurance company.

There is also renters insurance. Perhaps an umbrella policy can tie to that.

Audrey

[Gumby]

Quote:

Originally Posted by two4theroad My question is this: If I purchase an Umbrella policy for $1m to protect my assets, what keeps the vultures from suing for $2m to get my insurance co. to pay $1m and me to pay the other $1m from my hard earned retirement money? Also as an aside, I have been getting quotes for an umbrella policy and use USAA for my auto coverage. Their quote was exactly the same as my homeowners policy quote for all coverage options. They both require $500,000 min liability on house and cars and $250,000 on boat. They are both quoting from the same carrier Is this normal?

USAA also has umbrella policies. You should ask them for a quote.

[MJ]

Quote:

Originally Posted by audreyh1 I think you still can. They just require some minimums on home and car insurance - if you own them. Talk to your (or an) insurance company. There is also renters insurance. Perhaps an umbrella policy can tie to that. Audrey

I just sold my car and I cancelled my auto insurance but unfortunately I could not keep my Geico umbrella because they require that you have an auto policy with them. I sold it because I no longer needed one.

MJ

[audreyh1]

Well, that may be a requirement by GEICO, but other insurance companies will have different options.

You might see what AON Recreation has to say (an insurance broker). We have a "fulltimer's insurance" - a version of homeowners/auto insurance for RVers who do not own a house, plus an umbrella, arranged through them - different insurance companies but they handle the "package".

Audrey

[MJ]

Thanks Audrey. I realize that this was a Geico requirement. I have to do a bit of research.

[Martha]

MJ, a friend of mine got "renters" insurance and an umbrella for his father who was in a nursing home. Dad had cognitive impairments and would periodically take a swipe at people. This insurance covered that liability.

Talk to an agent as to what might work for you.

[audreyh1]

Quote:

Originally Posted by MJ Thanks Audrey. I realize that this was a Geico requirement. I have to do a bit of research.

Yes, when we sold our house and went full time in the RV, we had to deal with total changes in our insurance. There are only a few companies/agents who deal with the specialized insurance requirements of an RV fulltimer, but thankfully they are out there!

So, I suspect your case is simpler than ours, and that there are companies or agents willing to provide you the service.

Audrey

[bigla]

I have a 1million umbrella and fairly high auto liability and sure glad I did. I had a head on collision. IMO it was not clear who was at fault but I had a safe car with seatbelts and airbags and the young guy in the other car was not wearing seatbelts and car was older and not equiped with safety features. I pretty much walked away from the accident. He was seriously injured. I was out of state, he was local. My insurance co felt they would lose in court so they got 1.3 million from the insurance company as a final settlement.
After the accident I did move ownership of our homes to my wife and we segregated our finances. We knew the change in home deeds would stand up to a court challenge but felt we would not make it easy for them if it came down to it.
I was told IRA type money was protected.
Larry

[Patrick]

Quote:

Originally Posted by pedorrero I was concerned at the time (because I was considering marriage, a risk to one's assets all its own.)

Consult a good lawyer to draw up a pre-nuptial agreement for you.

[Patrick]

Quote:

Originally Posted by Spanky Lawyers can be your friends also according to the profession: "The truth is, when you are in a bind, a lawyer can be the best friend you have."

Yeah, just ask O.J. Simpson.

[Patrick]

Quote:

Originally Posted by two4theroad My question is this: If I purchase an Umbrella policy for $1m to protect my assets, what keeps the vultures from suing for $2m to get my insurance co. to pay $1m and me to pay the other $1m from my hard earned retirement money?

Nothing. But you will still be $1 million ahead.