Palm Springs Law Blog

Thursday, June 13, 2024

The Increasing Risk of Lawsuits: Why You Need Asset Protection Now

The U.S. is a litigious country, with over 100 million cases of all kinds filed in state courts each year. Nevertheless, regardless of how the parties in a specific lawsuit resolve their issues, going through any sort of legal proceeding presents a serious threat to the assets and resources of both parties.

The Possible Outcomes of a Lawsuit Are Costly

When you are sued, the resulting lawsuit may end relatively amicably and without the need for a trial, with you and the other party reaching a settlement agreement. But in the event that a settlement cannot be reached, a court will likely enter a verdict in favor of one party over the other after conducting a trial. 

Depending on the type of case and the damages being requested, you could be ordered to pay the other party’s medical bills, legal expenses, lost wages, and ongoing medical needs. You could also be responsible for paying damages to the other party for their pain and suffering. 

When all is said and done, an unfavorable settlement or adverse trial verdict could result in you having to potentially pay tens of thousands or hundreds of thousands of dollars.

How Settlements and Verdicts are Paid

When you are ordered to pay a settlement or verdict, any applicable insurance policy you have can be used to satisfy the judgment. However, if your insurance policy is not enough to cover the whole amount owed, the opposing party can look to your personal assets to satisfy the remainder.

For example, suppose that after a car accident, you reach a settlement with the injured driver in the amount of $75,000. Your insurance policy only pays up to $25,000, though, leaving a $50,000 difference. Your personal assets, including vehicles, financial accounts, and real estate, could be used to satisfy that balance.

Asset Protection Strategies

Your estate planning lawyer has several options available that can proactively shield your assets from being used to satisfy a judgment, such as:

  • Creating a trust to manage your valuable property

  • Forming a limited liability company (LLC) if you are a sole proprietor and own a significant amount of business property

  • Giving inter vivos gifts to friends and family (Inter vivos meaning “while alive”)

  • Leveraging exemptions in the law that exclude certain property from being seized

  • Finding other ways to divest yourself of personally owned properties

In general, an effective asset protection strategy is one that results in you owning as few valuable assets as possible while still retaining the use and ability to benefit from them. If you do not own a particular asset, then a creditor will be unable to seize it and use it to satisfy a judgment.

How to Get Started Protecting Your Assets

Taking charge of the legacy you hope to leave to your family involves ensuring it is protected against unforeseen events like litigation. Steps like creating a trust, forming a business, or otherwise divesting yourself of your ownership interest in your valuable property can keep these assets from being used to satisfy personal judgments. But your first step to protecting your assets is to contact a Palm Springs estate planning attorney from Heritage Legal PC. 

Once you have been sued, it is too late to take these steps to protect your property. If you are ready to get started today, Heritage Legal, PC, is here to help. Contact us today and request a consultation with us.

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