Your Asset protection Plan?

[CuriousJoe]

Just a quick question on primary residence..
If husband and wife are both on the title of the primary residence, and if ONE of them is sued and a judgement is made, which exceeds the insurance coverage and homestead exemption, can the creditor force the sale of the house to collect?
If not, doesn't it offer some "protection" for the remaining spouse for his/her life time, until they decide to sell the house?

 

[Corporateburnout]

Just a quick question on primary residence..
If husband and wife are both on the title of the primary residence, and if ONE of them is sued and a judgement is made, which exceeds the insurance coverage and homestead exemption, can the creditor force the sale of the house to collect?
If not, doesn't it offer some "protection" for the remaining spouse for his/her life time, until they decide to sell the house?

In MA the homestead protection is for both even if only one spouse's name is on the title as long as the other is listed on the declaration as a resident. The exemption is 500K then goes up to $1M at the age of 62.

So yes the protection is for both.

 

[CuriousJoe]

Sorry if my questions isn't clear..
Can the creditor FORCE the sale of the primary residence to satisfy the judgement, even if the OTHER spouse in not a party to the law suit?
Thanks

 

[Corporateburnout]

Sorry if my questions isn't clear..
Can the creditor FORCE the sale of the primary residence to satisfy the judgement, even if the OTHER spouse in not a party to the law suit?
Thanks

Not sure about other states but in MA no. Both spouses have the homestead protection.

 

[REWahoo]

Sorry if my questions isn't clear..
Can the creditor FORCE the sale of the primary residence to satisfy the judgement, even if the OTHER spouse in not a party to the law suit?
Thanks

Some states (FL, TX) have laws protecting a primary residence from lawsuits. You might find this article interesting:

http://www.nytimes.com/2012/11/03/y...ts-against-the-hazards-of-a-lawsuit.html?_r=0

 

[jetpack]

For me, I recently got the umbrella policy (partly from advice in this forum) .. My other method is camouflage, as people don't see me as rich. I would like however to 'come out' and enjoy a little more of these fruits. I guess the irrevocable trust is the only true protection? I just worry about giving someone else the steering wheel on my cash.

 

[phil1ben]

Just a couple of points:

1. The laws of each state differ widely as to what can be levied upon by a creditor. For example in PA, the creditor of a husband cannot levy on assets jointly owned by husband and wife. I know people here like to generalize (and that is OK) but the laws really do differ substantially.

2. I carry a 5MM Umbrella. I have obtained quotes to increase the amount to 10MM and 15MM and the cost moves up substantially above 5MM because my agent informed me that the risk is reinsured mostly by Lloyds. I have determined that the cost exceeded the risk in my opinion - for me. My Umbrella is through Chubb and is not very expensive given the relatively high cost Chubb charges for other insurance. I stay with Chubb but that is a story for another day.

3. Normally insurance policies do not insure against intentional torts such as assault -- so try not to punch anyone.......and if you do, it would be better to punch a poor, unemployed senior than a wealthy young surgeon.

4. If you have teenagers, check your insurance policy for host liability.

 

[Senator]

My 7 rental buildings are all owned by a separate LLC for each one. I have an S-Corp I use for property management and signing leases.

I have business liability, business umbrella, personal umbrella insurance.

And I try to do things right.

 

[Rustward]

I think the insurance company might not pay if you are found to be doing something illegal. <snip>

Isn't this what liability insurance is for? I don't think it has to be a perfectly legal damage.

I can see where certain policies might have specific exclusions, though.

 

[daylatedollarshort]

For me, I recently got the umbrella policy (partly from advice in this forum) .. My other method is camouflage, as people don't see me as rich. I would like however to 'come out' and enjoy a little more of these fruits. I guess the irrevocable trust is the only true protection? I just worry about giving someone else the steering wheel on my cash.

As other have noted for many assets, like retirement accounts and your personal residence, it depends on state law, but ERISA protected 401K plans have one of the highest levels of protection and supercede state law -

Is Your Retirement Plan Really Safe?

It is one of the reasons we aren't eager to convert all of the money in our former employer 401Ks early on to Roth IRAs.

One thing I have noticed is that most asset protection web sites and books are written by lawyers who stand to gain from expensive, asset protection geared, irrevocable trusts, but for some of us plebians who just managed to squirrel away enough to pull off ER, some of the less expensive asset protection options might suffice. Some states protect all your retirements accounts and personal residence.

 

[Options]

We've got most of our non-IRA assets in a revocable trust, including the house. We've got a $2 million Umbrella policy on top of that.

+1
Will be revisiting it year after next (circumstances have changed since trust was drawn up) and increasing umbrella policy as well.

 

[Travelwanted]

2. I carry a 5MM Umbrella. I have obtained quotes to increase the amount to 10MM and 15MM and the cost moves up substantially above 5MM because my agent informed me that the risk is reinsured mostly by Lloyds. I have determined that the cost exceeded the risk in my opinion - for me. My Umbrella is through Chubb and is not very expensive given the relatively high cost Chubb charges for other insurance. I stay with Chubb but that is a story for another day.

Check PURE...spin-off of Chubb. Same quality lower price.

 

[braumeister]

Just another thought for those who don't have a good umbrella policy because they think they are expensive:

Check it out. You will probably be surprised at how reasonable they can be.

 

[Rdub]

This site is great. I didn't know much about Umbrella Policies until last week. Since then I have done a lot of reading and should get my quote back from the Underwriter today and have the policy in place by tomorrow. I also read up on ERISA. I had planned on rolling our 401ks into IRAs at Vanguard once we RE, but after researching this, I believe I will keep the funds in our 401k. Besides, it has some pretty good funds that I am comfortable with. Next step is to research Homestead Exemption in CA.

 

[Gearhead Jim]

I think the insurance company might not pay if you are found to be doing something illegal. You are not suppose to hit people or what if you blew your house up making crack in your bathtub? Would your insurance pay?

In many (most?) states, your homeowner (and auto liability) insurance will not cover legal costs or damages that you inflict intentionally, even if you do so within the law.

When we bought our homeowner insurance 30+ years ago, the agent made very sure we understood that limitation, and used a couple of examples from his own clients that were pretty scary. After all, if someone is enough of a dirtbag that you must physically defend yourself, they will surely be enough of a dirtbag to sue you afterwards. Especially if they lose the fight.

You can buy liability insurance through the NRA and some other organizations which covers lawful use of a firearm in self defense, but I'm not aware of anything that covers you if you just smack the creep and bust out his teeth.

Anyone know of better coverage?

 

[Birdie Num Nums]

fist fight How old are you?

Jimmy Lennon Jr. & Ali (early 1960s)

 

[MRG]

In many (most?) states, your homeowner (and auto liability) insurance will not cover legal costs or damages that you inflict intentionally, even if you do so within the law.

When we bought our homeowner insurance 30+ years ago, the agent made very sure we understood that limitation, and used a couple of examples from his own clients that were pretty scary. After all, if someone is enough of a dirtbag that you must physically defend yourself, they will surely be enough of a dirtbag to sue you afterwards. Especially if they lose the fight.

You can buy liability insurance through the NRA and some other organizations which covers lawful use of a firearm in self defense, but I'm not aware of anything that covers you if you just smack the creep and bust out his teeth.

Anyone know of better coverage?

.45 ACP.

In this state they can't sue you for legitimate use of force protecting yourself or others, against the 7 deadly sins. I'm sure thats different in the other 49 states.
MRG

 

[aida2003]

Interesting/thought provoking thread. A couple of questions:

If a family has a $1mln umbrella and 4 driving family members. If 2 or 3 of the members get into 2-3 separate car accidents in say the same month and all of them get sued, is the $1mln umbrella policy for EACH member or total for the whole family?

Are Roth IRA's or TIRA's protected against a lawsuit?

Interesting note about keeping money in the 401k after retiring which probably implies that TIRA's and RIRA's are not protected, I guess. Then I'm curious how people weigh what it's better to do: rollover or leave in the 401k considering tax implications vs. a potential lawsuit. Do they stop driving as soon as they start rolling over the money? Considering that house might be protected (in quite a few states), then a potential retiree doesn't need to feel rushed to become a renter.

So many questions to consider before retiring: various thresholds in order to save on taxes, ACA insurance, when SS becomes taxable, LTC insurance or not, now potential lawsuits, anything else? Is there a manual (sticky thread on ER?) with all the questions/instructions/advice for all these things? It seems it's much easier to keep w*rking sometimes .

 

[brewer12345]

Because IRAs are not ERISA plans, protection depends upon state law. My state protects them to an unlimited amount, other states have a dollar limit or even no protection.

 

[daylatedollarshort]

So many questions to consider before retiring: various thresholds in order to save on taxes, ACA insurance, when SS becomes taxable, LTC insurance or not, now potential lawsuits, anything else? Is there a manual (sticky thread on ER?) with all the questions/instructions/advice for all these things? It seems it's much easier to keep w*rking sometimes .

It is a complex issue and we have not found an easy solution. I made my own custom spreadsheet and then used the detailed cash flow chart in the Fidelity RIP to cross check my calculations. On my chart I can then do more playing around with taxes, HSA accounts and ACA subsidies, so in reality I can get the taxes for the foreseeable future much lower than the RIP shows.

On the RIP I don't use the detailed expenses - just an annual dollar figure in the other category. Otherwise I think some of their escalating estimates are not realistic, especially when you compare them to the Consumer Expenditure Survey, median household income and average Social Security benefits today. I know health care expenses are escalating higher than Social Security benefits, but if something doesn't give on the health expense, I just don't see us having a nation of voting retirees going without food and shelter in order to pay for medical care.

 

[aida2003]

Because IRAs are not ERISA plans, protection depends upon state law. My state protects them to an unlimited amount, other states have a dollar limit or even no protection.

What's your state, Brewer? What's the catch there with regards to onerous (?) taxes for retirees, inheritance laws, anything else that would make your state not attractive to a potential retiree?
If IRA's are protected in that state, but if you're on vacation in another state and you have an accident, can't the victim sue you in that state and your IRA loses its shield?

 

[brewer12345]

I don't know what happens if you cross state lines. Perhaps someone does and could tell us?

My state has a tiny homestead exemption plus forest fires, tornadoes, mountain lions, rattlesnakes, crazy people with guns, not enough water, etc. You don't want to move here.

 

[REWahoo]

My state has a tiny homestead exemption plus forest fires, tornadoes, mountain lions, rattlesnakes, crazy people with guns, not enough water, etc. You don't want to move here.

Careful, you're dangerously close to copyright infringement...

 

[brewer12345]

Careful, you're dangerously close to copyright infringement...

Sorry, forgot the credit:

"This message brought to you courtesy of the State of Texas Visitor Welcome Board."

We can send you an extra 100,000 Californians as compensation.

 

[REWahoo]

We can send you an extra 100,000 Californians as compensation.

Don't bother, they're already here: Texas dominates ranks of fastest growing cities