If your clients get sued, you will lose assets, too. That’s why it’s important for you to help them protect their assets.
There are over 100 million lawsuits each year. One in three people will be sued over the next 12 months.
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Part of the reason is the bad economy. People have lost their jobs or are making less money so they sue others to get extra income. If they win, it’s a tax-free bonus.
In one instance, a deer ran across the road and damaged someone’s car. The person sued the state, saying the deer did not cross at the designated crossing.
Many defendants, whether private or governmental, settle suits to avoid what can be astronomical legal fees.
Clients who are prepared situate their assets so they do not own anything, yet they have control over the assets.
Educating yourself on legal measures from both financial and legal perspectives will help you help your clients. First, you need to be able to refer the client to capable legal counsel. This is not necessarily an estate or trust attorney.
An asset protection attorney
will help clients inventory their wealth to know where everything is and to ensure everything is included in the plan.
Assets include valuable domain names, collections that clients may not realize have value, telephone numbers, and any intellectual property the client may have developed.
Cash in the bank or stock and bond investments are non-exempt assets that can be converted to an exempt status by selling them and placing the proceeds in an annuity, a life insurance policy, or a house.
But each jurisdiction may have different exemptions. So it’s a good idea to check out your and your clients’ state exemption lists.
Another strategy is to transfer ownership of the assets to a protective entity like an LLC, trust, or family limited partnership.
Your clients can also make themselves unattractive to potential litigators by adding on debt such as lines of credit or mortgages. For example, a house worth $1 million but with a $950,000 mortgage is not an attractive litigation asset.
You can help protect your clients from frivolous lawsuits. The first step is to educate yourself.
Then you can educate them and guide them to take action.