As you’re probably well-aware, we live in a sue happy society, one
where people seem to turn to seek damages at every turn. In the United
States, millions of civil cases are filed every year in our courts. For
certain professionals and license holders – doctors, lawyers, real
estate developers, architects, and business owners – it’s
not a matter of “if” they’ll get sued, it’s a
matter of “when.”
According to the
New England Journal of Medicine, doctors in particular are at a high risk of a medical malpractice lawsuit.
“The cumulative risk of facing a malpractice claim is high in all
specialties,” according to the
Journal.
Fortunately, there are asset protection tools available, which can protect
people’s assets and insulate them from lawsuits. Such tools can
protect a person’s personal residence, their financial accounts
and their business from potential creditors and lawsuits. Here, I lay
out some of the methods of making yourself a less attractive target to
someone who desires to file a lawsuit against you.
1. Take full advantage of insurance. The first line of defense is to purchase adequate insurance to protect
you and your business. Don’t do this alone – seek the advice
of a professional to ensure you obtain ample coverage for your home, automobiles,
vacation property, RVs and other property. If you’re a business
owner, update your commercial general liability coverage regularly, and
find out if it would be beneficial for you to purchase employment practices
and professional liability insurance.
2. You may need to reorganize marital property. If you jointly own property, such as your
home with your
spouse, creditors may be able to force you to liquidate your share. In some instances,
it’s smart for a professional to sign over their share to their
spouse. However, this approach is not for everybody as it comes with drawbacks.
If you decided to file for
divorce, this separate property (owned by your spouse) could become the subject
of a heated dispute.
3. Create separate business entities. If everything you own is under your name or your company’s name,
one lawsuit could lead to a large, catastrophic loss. A better way to
cut your losses may be to take your most valuable assets, such as your
real estate and equipment and place them in separate entities. Often,
this means creating multiple limited liability companies (LLCs), multiple
trusts, or other types of business entities. This way, if your assets
become the target of a lawsuit, only the assets contained in one entity
are vulnerable, instead of them all being at risk.
I am only scratching the surface in regards to asset protection; another
solution may include a domestic asset protection
trust (DAPT). Since each person’s situation is unique, the appropriate
asset protection strategies depend on the individual’s circumstances.
However, sometimes all it takes is one to dramatically decrease the losses
a person faces if he or she becomes the target of a lawsuit. To learn more,
contact my Nashville probate and estate planning firm to schedule a consultation.