Protecting assets from lawsuits

[pletal]

I am working on my taxes with my CPA this week. We had a conversation about everyone becoming sue happy. After working and saving for many years I wouldn't like to become a victim of a frivolous lawsuit. CPA spoke of trusts, annuities, etc. Anyone else have these fears? Need some advice on what to do to protect assets. Thanks

 

[joeea]

Are you in a profession that is susceptible to lawsuits? If so, many professional groups have insurance.

I don't worry about being sued.

 

[Dtail]

Have you researched Umbrella Insurance, although it is a little pricier for Florida?

 

[marko]

Are you in a profession that is susceptible to lawsuits? If so, many professional groups have insurance.

I don't worry about being sued.

I don't think one is limited by profession. If you own property or a car you're open to a liability lawsuit if someone has an accident (or a fake accident).

I agree with as OP noted, there's a 'sue happy' mentality out there. Every other TV commercial is from some attorney telling folks to "get what's yours". I know of a few acquaintances who've been sued by "professional litigants".

Members of this forum tend to have more assets than most making them even bigger targets. I've often mentioned here that my lawyer once told me "anyone with $20 buck can sue you...they don't need a case, they're just hoping you'll settle"

 

[sturbridge]

My strategies: I have one of the smaller houses in my neighborhood, I drive an economy car. Therefore someone coming to rob or fake an accident, is much more likely to try it at my neighbor's house, because they look like they have money and I look like I don't have much. I also have high limits on auto insurance and a 2MM umbrella policy. The most likely way I'll be sued is if I'm in a car accident, so I'm covered on that side at least. If something ACTUALLY happens and I get sued for some other reason, I could still be in trouble, but I do my best at avoiding being an intentional target.

 

[marko]

Lawyers will go through a long line of connections to find the deepest pockets. If someone had a drink at your house and then (drunk or not) crashed into someone with their car, you could be in the line of fire.

Lawyers now advertise: "Don't worry, the person you sue likely has insurance who will most often settle out of court". Most of the time they only want a quick settlement for a fraction of what they're asking.

My company was once sued because we simply sold a part, that went onto a part, that went onto a part, that someone grossly mis-used and was injured. We prevailed but only after having spent tens of thousands in legal defense fees.

 

[urn2bfree]

Most people cannot insure against the sorts of sums that lawyers can ask a jury to award them and their clients.
Until you have sat in a courtroom at the defendants table and heard a lawyer lie and basically mislead a jury on the facts, and heard that lawyer ask that $25 Million be taken away from you, (far more than you have or are likely insured against), and sat around and paced waiting for the jury to come back, and stood there in a court room, your heart pounding inside your chest as the jury announces their verdict--you have no idea how inadequate insurance and every other precaution you take can feel.

And I have no idea how it must feel when the jury decides against you... But the first part was bad enough.

I don't have an answer, but agree there is not just a "sue happy" attitude in this country, there is an attitude by others that basically says, "so what, that's what insurance is for." And that attitude causes juries to give big awards, because "hey, the insurance will just pay it, as if it has no effect on the human being sitting there at the defendant's table."
Of course, everybody ends up paying for this reckless disregard for reality. Higher insurance premiums for all, higher prices on everything so those paying for the insurance can pay those premiums, not to mention wasteful and ludicrous defensive practices --from a doctor ordering unnecessary tests and spending inordinate time documenting absolutely everything and anything, to companies spending time end effort to put things like "do not stand on oven door" because some idiots use the oven door as a step stool. (And lawyers argue because one such idiot was married to an oven manufacturer that this somehow proves it is the manufacturer's fault that people reach such idiotic conclusions.)
And don't let's start the whole "hot coffee" thing with all the claims about the "real story" supposedly making it all seem a reasonable claim was adjudicated there. I have read the whole story, seen Adam Ruins Everything try desperately to "explain" how it all really went down, and hiw the poor old woman was badly burned and only asked for blah blah blah, etc. --The coffee is/was dangerously hot. McDonald's knew that. That was McDonald's fault. Balancing hot coffee in HER LAP was HER FAULT! HER BAD CHOICE! If she had decided to balance it on her head and it burned her face would that be McDonald's fault?
If you are a plaintiff you do not want me on the jury.

 

[bingybear]

make sure you are well insured for auto, home, etc. have a big enough umbrella and have the underlying insurances. Be even more careful if you are on a home owners or condo board. I hate to day it but irrevocable trusts might be good in this case. There are some assets that may have some protection like 401ks and IRAs (state dependent) that have some protections.

edit - having insurance is partially to have an insurer will fight for you. If you have a couple million in insurance and have $20 mil real loss, you are likely screwed. But if you have $3 mil and are being sued for $10 mil, but the insurance company thinks should be $2mil or less, I would expect the insurance will mount a good fight for that last mil.

 

[Gumby]

Clean living and lots of insurance is the best defense.

Also keep in mind that money in 401k/403b/457 and IRAs is protected from creditors in bankruptcy (to which you might need to resort if you get a large judgment against you). That would argue for keeping your assets in tax deferred accounts until just before you need to spend them. Your homestead exemption varies by state. You could choose to live in a state that has an unlimited exemption, such as Texas and Florida. https://www.assetprotectionplanners.com/planning/homestead-exemptions-by-state/

You could also rent your house instead of own it. And you might lease your car. It some states, that puts the actual owner of the car on the hook in addition to you. More, bigger pocketed targets means less focus on you.

Finally, there are ways to own property through layered LLCs that can make it more difficult, but not impossible, to trace and attach.

 

[marko]

Most people cannot insure against the sorts of sums that lawyers can ask a jury to award them and their clients.
Until you have sat in a courtroom at the defendants table and heard a lawyer lie and basically mislead a jury on the facts, and heard that lawyer ask that $25 Million be taken away from you, (far more than you have or are likely insured against), and sat around and paced waiting for the jury to come back, and stood there in a court room, your heart pounding inside your chest as the jury announces their verdict--you have no idea how inadequate insurance and every other precaution you take can feel.

And I have no idea how it must feel when the jury decides against you... But the first part was bad enough.

I don't have an answer, but agree there is not just a "sue happy" attitude in this country, there is an attitude by others that basically says, "so what, that's what insurance is for." And that attitude causes juries to give big awards, because "hey, the insurance will just pay it, as if it has no effect on the human being sitting there at the defendant's table."
Of course, everybody ends up paying for this reckless disregard for reality. Higher insurance premiums for all, higher prices on everything so those paying for the insurance can pay those premiums, not to mention wasteful and ludicrous defensive practices --from a doctor ordering unnecessary tests and spending inordinate time documenting absolutely everything and anything, to companies spending time end effort to put things like "do not stand on oven door" because some idiots use the oven door as a step stool. (And lawyers argue because one such idiot was married to an oven manufacturer that this somehow proves it is the manufacturer's fault that people reach such idiotic conclusions.)
And don't let's start the whole "hot coffee" thing with all the claims about the "real story" supposedly making it all seem a reasonable claim was adjudicated there. I have read the whole story, seen Adam Ruins Everything try desperately to "explain" how it all really went down, and hiw the poor old woman was badly burned and only asked for blah blah blah, etc. --The coffee is/was dangerously hot. McDonald's knew that. That was McDonald's fault. Balancing hot coffee in HER LAP was HER FAULT! HER BAD CHOICE! If she had decided to balance it on her head and it burned her face would that be McDonald's fault?
If you are a plaintiff you do not want me on the jury.

+1. Nice rant! Spot on.

 

[Stormy Kromer]

Trusts or annuities may be an option, but I would only use them if you want them for another reason besides just protecting your assets from a lawsuit.


As others have said, an Umbrella Liability Policy is what you (and everyone else) should have. They are readily available and quite reasonable. One of the most important features of these policies is that they provide defense coverage, usually above and beyond the limit of coverage. Insurers don't want to see a judgement settle for any more than you do since it's their money on the line. They will fight hard to defend you and basically hold your hand through the whole traumatic event of a lawsuit. With adequate limits of coverage an excess verdict is very rare. Make sure you have enough liability coverage to protect what you have to lose. One size does not fit all.


Also, make your own luck. Many claims involve the use of engines, animals or alcohol. Be careful with all of these and make sure your insurance covers them.


The biggest exposure we all have is owning a car. The owner is responsible for whoever is operating it. If you have a young driver in your household get the title in their name and have them insure it themselves. My neighbor almost lost his house because he titled his son's vehicle because he could insure it cheaper. The son was in a fatal accident and dad had $100,000 of insurance. Judgement was $300,000 and dad is still paying on the $200,000 excess. Get auto titles out of you name as soon as children can title them and make sure they have decent liability limits, those limits are likely higher than what direct insurers on the internet will offer you in their quote.

 

[Out of Steam]

Get auto titles out of you name as soon as children can title them and make sure they have decent liability limits, those limits are likely higher than what direct insurers on the internet will offer you in their quote.

Will be doing this with our daughter's car when we replace it in a few months.

I've been hearing about (and keeping) $100K/$300K liability limits since I started driving. Figured a couple of years ago that that wasn't enough any more and went to $250K/$500K.

 

[Jerry1]

Will be doing this with our daughter's car when we replace it in a few months.

I've been hearing about (and keeping) $100K/$300K liability limits since I started driving. Figured a couple of years ago that that wasn't enough any more and went to $250K/$500K.

Me and DW have our names on DD's house (we bought it). We saw the other day that they (DD and SIL) changed the insurer to save money. We also noticed that they had the prescribed lower limit of liability. We immediately moved that up to $1M and made it clear to DD how cheap liability insurance is compared to the risk and that we'll be looking at their car insurance next. Even if you don't have much, good liability insurance for home and auto is critical IMHO.

 

[street]

Are you in a profession that is susceptible to lawsuits? If so, many professional groups have insurance.

I don't worry about being sued.

Very poor advise.

 

[bobandsherry]

Have you researched Umbrella Insurance, although it is a little pricier for Florida?

Not sure how Florida compares to all states, but it's nearly 4x vs. premium I'd pay in Illinois.

 

[Dtail]

Not sure how Florida compares to all states, but it's nearly 4x vs. premium I'd pay in Illinois.

I pay $630 yearly for 2mm of insurance. Due to the no fault car driver policies and many drivers not even having car insurance, this raises the car and umbrella insurance rates for Florida.

 

[eytonxav]

It may depend on state law, but I believe in many states IRA money is protected.

 

[CoolRich59]

+1 on an umbrella policy. IMO, that should cover most areas of potential liability.

 

[lwp2017]

My dad was sued when I was twelve years old, the stress & worry made an impression on me. My parents thought we would lose the farm. My dad prevailed but developed a serious stomach condition from the stress.

My strategy
- umbrella of $5M
-liability insurance on property, Home, equipment, vehicles.
- we have a LLC, all farm equipment that goes off property onto rural roads is in it.
Total property loss & liability insurance cost is about $11K a year.

 

[joeea]

I don't think one is limited by profession.

I didn't say that one was limited by profession. Only that some professions have specialized insurance for their situation.

If you own property or a car you're open to a liability lawsuit if someone has an accident (or a fake accident).

I have insurance for that.

 

[joeea]

Very poor advise.

I didn't post any advice.
I asked if the OP was in a profession that might provide specialized insurance. It was a question.

 

[lwp2017]

If you have a young driver in your household get the title in their name and have them insure it themselves. .

Great advice ^^^

We did the same based on similar advice from our attorney.

Attorney also shared that the best strategy is to have an umbrella policy equivalent to the value of all assets that you could lose in a settlement. Exceptions would be homestead, 401k.

 

[Amethyst]

Anyone can sue for anything. Frequently they are looking for a settlement to make them go away.

 

[Luvdogs]

In our state there are many billboards for attorneys advertising giant settlements--$1+ million.

I know people in the insurance liability industry and they say that it is becoming more difficult to settle claims for a fair/reasonable amount of money because many people see the billboards/advertising and think that their little pinky injury is worth a million dollars.

Then we get our insurance bill and it goes up by 10% each year without having filed a claim in 10+ years.

Greed, ugh, get a job and don't pee your $ away and don't keep trying to get something for nothing!

 

[ncbill]

Umbrella liability policy - even $5 million coverage is inexpensive.

Don't drink & drive.