Protecting Your Nest Egg from the Vultures?

[ShokWaveRider]

I just got to thinking (Bet you wondered what the noise was. ) Just the other day I was involved in a very minor fender bender. No injuries and little damage.

I was stationary at a stop sign at a "T" junction, and was hit by a car turning left who cut the corner short and clipped me. He was pulling a trailer, and his trailer's mid section clipped my left hand front fender. I reversed up very quickly so as not to loose the entire fender and who knows what else. I called the police to make a traffic report, and was so sure they would list it as the other guy's fault. They did not. They said no fault could be proven, as the other guy insisted that I was moving forward. It was his word against mine. Even though logic stated that I would have not hit the middle of hit trailer if I was going forward, and there would have been a lot more damage. I guess the police are not very logical. So no fault at the scene, not worth the insurance claim. I did let them know but told them I did not want to put in a claim.

Well, as mentioned I got to thinking, if there was a lot of damage and personal injury, what is there to stop an aggressive lawyer from coming after my nest egg? With the state of the judicial system, who knows what the outcome would be.

What do you all do to make sure you are not devastated by such a disaster? Fault aside. As the question is really general. Even if it was your fault.

SWR

 

[REWahoo]

Auto liability insurance and umbrella policy.

 

[GTM]

Easy way . . buy an Umbrella policy which is insurance above the max limits on your auto liability.
Also adds liability to your homeowners and rental properties if any.

Policies are generally cheap,

ie. $2 million may cost $350 a year depending on the state you live in.
You can more probably purchase up to $10 million.

 

[smooch]

We recently bought an umbrella policy at the recommendation of the posters on this site. The price seemed very reasonable for more peace of mind.

 

[JPatrick]

Except where a fatality is involved, don't expect much from the police in the way of an investigation.  They just let the parties and insurance companies slug it out.
I'd think twice about not letting your insurance know about this as he may want to file a claim against you and insurance companies don't like to be surprised.
The umbrella is a good idea and don't wear your Rolex around dirtbags.

 

[SteveR]

The umbrella policy is a good idea. I have lower liability (state minimum only) on my cars and other toys but I carry an umbrella policy to cover the liability on all of the stuff in one policy. I can have higher limits and it costs less.

Just don't let anyone know you have it or they might try to sue you to get their hands on it.

 

[kayelem]

I've had umbrella for a long time. I feel better, but luckily never had to use it.

My insurance guy convinced me that they would look at my employer (mega mega corp) and come after me regardless if I had $ or not. Probably true.

 

[LEX]

I have seen the following methods used. I do not endorse or advise any of them, but am posting them for entertainment only.

Be judgement proof. Rent your home and keep all your funds in suitcases in the closet. If you get sued, move, pack your suitcases, and leave no forwarding address. Another route is to have your accounts in a Tax ID number that has no cross reference to your social security number.

Have all your assets in the name of a trustee, such as an officer of a Nevada LLC. Its much harder to locate and execute a judgement.

A GCL umbrella will work, but it tends to reward a frivilous lawsuit. I know of several folks that prefer to have the plaintiff run an asset search prior to the suit and find no assets or real estate in your name. It has been suggested that this may actually prevent the suit, since a plaintiffs lawyer will be less likely to bring suit on a contingency basis if it appears from the asset search that you have nothing to attach in judgement.

 

[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.

 

[unclemick]

Whatever happened to the 'Cook Island Trust' - I used to hear about in 'ancient days'. Did those guy's switch over to tourism or what.

Or - heh, heh - perhaps they sold the Island's and moved to Nigeria?

Heh, heh, heh, heh.

 

[farmerEd]

I've wondered the same thing...I have an umbrella policy but you never know when the limits of it will be reached and then they take your house and everything else....

What about an offshore bank account? I don't know much about them, but they are perfectly legal to have as long as you don't hide them from the IRS....I've often wondered, say you had most of your dough parked in an offshore account (which you claim on your tax return of course), if that is substantially all of your assets, and you got sued, how hard would it be for the claimant to even find out about it, and if you lost, how hard would it be for them to collect from you?

Can a US based lawyer lay claim to money in another country?

 

[Martha]

I've wondered the same thing...I have an umbrella policy but you never know when the limits of it will be reached and then they take your house and everything else....

What about an offshore bank account? I don't know much about them, but they are perfectly legal to have as long as you don't hide them from the IRS....I've often wondered, say you had most of your dough parked in an offshore account (which you claim on your tax return of course), if that is substantially all of your assets, and you got sued, how hard would it be for the claimant to even find out about it, and if you lost, how hard would it be for them to collect from you?

Can a US based lawyer lay claim to money in another country?

See my post #12 in this thread: http://early-retirement.org/forums/index.php?topic=2016.0

I have collected money as a bankruptcy trustee from off shore accounts before. I will find out about it from your tax returns. Or from someone telling on you.

 

[Mountain_Mike]

A little bit along the lines of Lex's post: Don't appear to be worth suing. Drive an older junker car, don't dress to the hilt, live in a modest home. Keep some of your assets in forms that are not easily traceable.

I may be wrong here, but I thought "retirement" accounts (401K, 457, 403b) and pensions untouchable in lawsuits? If I am incorrect, under what circumstances are they subject to being siezed?

 

[Martha]

I may be wrong here, but I thought "retirement" accounts (401K, 457, 403b) and pensions untouchable in lawsuits? If I am incorrect, under what circumstances are they subject to being siezed?

Under ERISA, tax qualified retirement plans are exempt from creditors, except for some minor exceptions, including qualified domestic relations orders and claims of the IRS for taxes. Most all pensions are protected under ERISA (like government and union pension plans). Nearly all 401(k)s have complete protection from creditors under ERISA, no matter how much money is in the plan. ( There may be some oddball 401(k)s that are not covered by ERISA. Also, there is some recent dispute concerning solo 401(k)s. Some people are now saying that there is no protection under ERISA because there are no employees and others are saying yes there is an employee--yourself.)

BTW, some courts have held that 403(b) plans are not protected under ERISA or only partially protected. About 10 years ago I settled a case where I claimed in a bankruptcy that someone's 403(b) plan was not exempt from creditors. Never went to trial but I got half the plan assets in the settlement. Can't recall whether 457 plans have as broad protections as a 401(k) plan.

An ERISA pension or an employer established 401(k) under ERISA are the "best" plans to have from a creditor protection standpoint.

 

[Mountain_Mike]

Dave,

My key to being bullet-proof from the IRS is to pay my taxes. I totally render to Ceasar what I owe to Ceasar.

The thrust of my post was geared more toward protecting yourself from money-grubbers who may feel inclined to file lawsuits of questionable merit. I see nothing wrong with appearing to be not worth the trouble of a lawsuit.

 

[Patrick]

Homestead your house.

 

[dwk]

This is a little bit of practical advice. I would strongly recommend if you have young drivers on your policy to add an umbrella policy.

My son was a passenger (in the back seat) and was killed in an accident. The driver was a young man who has very little in the way assets and carried the minimum auto insurance coverage; $25,000.

Even though my son was in someone else's car he was covered under my policy which had higher coverage -- I had never thought of an umbrella policy until this happened. My insurance company at the time was progressive and they are refusing to pay the benefit -- because my son assumed the risk of getting in a car with some one who had been drinking. I'm now in the process of having to sue Progressive.

It's really very little money for some peace of mind.

dwk

 

[Martha]

Mountain Mike, there are collectors and then there are collectors. If things get to the point of bankruptcy the bankruptcy trustee can be the toughest collector because he or she knows the ins and outs of how people try to hide money.

If it doesn't get that far, and you are just worried about a car accident and whether the PI lawyer is going to settle for the insurance money or try to get more, my experience is that PI lawyers don't know much about collection law and unless there is clear indication there are significant assets, they most often try to settle within insurance limits.

If the case goes to trial and you lose big, far in excess of your insurance limits, then the question is whether the plaintiff will hire someone to try to get assets from you. My own personal experience is that this is rare, but it might be because most people don't have a lot of assets.

In Minnesota and Wisconsin, there are a number of tools that can be used to help find assets when collecting a judgment. For example, you can be required to fill out a questionaire as to what assets you have and where they are located. The lawyer can do your deposition and request documents from you. If you don't cooperate, this is contempt of court. I have had people put in jail for not cooperating with asset discovery. I have done a number of asset discovery depostions over the years and poured through peoples' bank account statements and tax returns, etc, looking for possible assets to take when collecting a judgment.

People lie about their assets. Often I have found assets because some outside person tells me about an asset (ex wives the most common) or just because I kept digging because something didn't smell right. People also lie about little things I never cared about: Do you have any jewelry? No. What about that diamond ring on your finger?

As a former vulture, I recommend having high insurance limits and maximizing your assets that are exempt from creditors.

 

[farmerEd]

All this talk about the inability to hide your assets is making me think that perhaps burying some gold bars in the backyard ain't so crazy after all

 

[Mountain_Mike]

Martha,

Thanks for your input from the "vulture" point of view.

Farmer Ed,

Yes, that thought had crossed my mind as well, except gold and burried cash do not generate any interest. Also, it would not be the brightest idea to bury such items in your own back yard, since that would be the first place "they" would look.

 

[farmerEd]

"they" being what? the black helicopters?

 

[REWahoo]

"they" being what? the black helicopters?

Ssssshhhhhh.... We don't talk about "they/them" on this board.

REW

 

[Martha]

Well I admit I was "they." (Al should have fun with that sentence)

I never looked in anyones back yard.

I have gone through people's houses though. Once I was hired to collect money from a former stock broker who had stolen from his clients. He was in jail and my job was to find out what he had and take and sell all of it.

I went through his house and he had a number of books, pamphets and other writings around about how and where to hide assets from creditors, and a lot stuff about moving overseas to countries with no extradition treaties. Poor boy, he didn't escape the country fast enough. Sold everything. Even the books on hiding money in off shore trusts.

He is now out of jail and on occasion I see him walking around downtown. He pretends not to know me.

 

[LEX]

Physical cash on hand is very difficult to sieze by a Judgement creditor.  As a lawyer who has attempted to collect judgments, it is nearly impossible to get assets that are "out of the system' of bank accounts, land title, and similar traceable property.  

Cash in a briefcase sometimes trumps any sophisticated offshore trust when it comes down to what actaully survives a vigorous collection effort.  The odds are on the side of a determined debtor who ignores court orders, collection pros' and writs of garnishment.  Most of the uncollected judgements I have faced are situations where the losing debtor just takes the cash money and leaves their rented flat and there is little one can do to stop them despite all the court orders and legal process.

You can hire all the PI's you want, but all you typically get are photos of the deadbeat and a new address, but never his briefcase of cash.

 

[REWahoo]

If you're in ER, and you've got a million or so in the bank and living on a meager $40k dividends and interest, your nest egg is vulnerable, regardless of whether you are on the straight and narrow or not.

Dave, it's clear that you know who "they" are...or is it is? Guess it depends upon what the definition of "is" is.

REW