No one can predict whether they will one day be sued or have to declare bankruptcy, but most of us can be confident that these things won't happen to us. These kinds of disastrous financial events are relatively rare, and when they do happen, they tend to happen to people in certain categories. Unless you own a business, work in a high-risk occupation, or have a high net worth, you probably don't have to worry about asset protection strategies as part of your estate plan.
However, if you do fall into one of these categories, you should consider talking to an attorney about your options for protecting your assets from potential threats. Because each person's situation is unique, attorney Ben Patton offers custom asset protection planning to individuals whose assets could be at risk.
Potential Targets for Lawsuits and Creditors
Wealthy people and professionals in certain occupations are at a greater risk of being targeted by creditors and lawsuits, and they often have a lot to lose. People who might want to consider asset protection strategies include the following.
High-Net-Worth Individuals
For obvious reasons, people who have amassed a great deal of money are often targeted by others seeking to get a hold of some of their assets. Wealthy people are at risk from:
- Lawsuits. You can't get blood from a stone, which is one reason litigious people tend to target wealthy individuals. Personal injury claims, including car accidents, premises liability, wrongful death, and other claims, could quickly drain a bank account if they are successful.
- Creditors. Creditors are more likely to fight for a share of the assets when the person declaring bankruptcy owns valuable property than if they don't have much to begin with.
- Ex-spouses. Regardless of whether there was a pre-nuptial agreement or not, an ex who felt cheated in a divorce settlement could go after additional funds later on.
People in High-Risk Professions
Professionals in certain occupations carry insurance because they know they are likely to be sued. That both protects them and makes them a target for lawsuits. If they don't have insurance or the policy is insufficient to cover a plaintiff's alleged losses, their personal assets could become a target. These professions include:
- Doctors
- Lawyers
- Real estate developers
- Accountants
- Government officials
Business Owners
Depending on the type of business and the products sold, a business owner could be held personally liable for injuries on the property, harm caused by a product, copyright infringement, and other claims of harm if their business is not structured in a way that protects them. Forming a Limited Liability Company (LLC) is one way business owners can protect themselves from legal actions against the company.
Legal Tools for Protecting Personal Assets
There are legal strategies for protecting certain assets from the threats we have described above, but there is no one-size-fits-all solution. Meeting with an experienced estate planning lawyer to discuss your concerns is the best way to come up with a plan that meets your needs. Many asset protection options are governed by state law, and Florida is not one of the friendlier states when it comes to protecting personal assets. Your options might include:
- Trusts. Florida does not allow for asset protection trusts like some other states do, but a properly executed irrevocable trust could be an option for protecting some assets. However, the downside is that you will permanently lose access to those funds.
- Business structures. If you own rental properties, forming an LLC is a smart way to protect your personal assets from tenant lawsuits. Family members who are in business together might benefit from forming a Family Limited Partnership (FLP).
- Homestead law. Florida's Homestead creditor protection law provides homeowners with protection against most types of creditor claims, allowing them to keep their primary residence safe from seizure or forced sale. This law ensures that a homeowner's primary residence cannot be taken away to pay off most types of debt.
- Insurance policies. If you believe you are at risk of being sued because of your occupation, carrying a sufficient amount of the right kind of liability insurance is a must.
- Distributions. On the advice of a knowledgeable estate planning attorney, you might want to make certain distributions before your death. Once the assets change ownership, they can no longer be targeted by people coming after you.
Our Team Will Help You Understand Your Options
The average Tallahassee family does not have to worry about protecting their personal assets from bankruptcy or legal action, but if you think you might be in a high-risk category, schedule a consultation with Ben to discuss your options. He will be upfront and honest with you about your risk and the options available to you. If you would like more information about asset protection in Florida, contact us to get started today.