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Protect Your Estate and Assets From a Lawsuit

Posted on: May 3rd, 2017
lockFew asset protection options remain once a lawsuit or judgment is filed. While some jurisdictions and/or circumstances may allow for some efforts to shield assets in the early stages of a suit, oftentimes actions made after being served are illegal and/or void. Effective asset protection measures are implemented in advance of litigation, and the most effective protection arises from regular plan reviews and adjustments.

Estates may be the target of numerous claims. In addition to creditor claims associated with the decedent’s death, surviving heirs might dispute the will and place a lien on property, lawsuits pending prior to the decedent’s death might need resolution, Medicaid claims may arise, and other factors could risk estate assets. In addition to these matters, retirement assets and life insurance benefits left outright to family members could be depleted if the heir(s) is the target of a lawsuit, depending on where the beneficiary resides. In some circumstances, if the heir is married at the time of their inheritance and later divorces, the other spouse may be entitled to a portion of this inheritance.

Aside from post-mortem asset protection, some risks affect assets during one’s lifetime. Personal injury claims, debts, and conflicts in business dealings could evolve into litigation. Some individuals have a higher risk exposure than others (such as business owners, physicians, and attorneys), and it is in their best interest to mitigate the impact of future lawsuits. Some safeguarding tools include:
  • Trusts. Custom trusts can help to shield assets throughout one’s lifetime and following their death. For lifetime protection, properly holding assets such as real property, annuities, investments, and collectibles in an irrevocable trust helps to prevent asset depletion or loss due to claims or suits. IRA Beneficiary Trusts and Standalone Retirement Trusts help preserve retirement assets for beneficiaries, shielding assets from divorce claims, suits, and more. In regard to retirement assets, learn about the downsides of naming a revocable living trust as beneficiary of an IRA.
  • Formations. Various entities can help to manage exposure to claims. Incorporation (S-Corporation, C-Corporation), Limited Liability Company (LLC), and other formations can help to protect assets to various degrees. For those with business interests, these tools clearly divide assets and prevent business claims from tapping personal assets. At the same time these tools curtail lawsuits and judgments held personally against the individual from affecting business assets.
  • Titling. Careful consideration of asset titles helps to minimize liability. It may be in one’s best interest to hold real property titles in the name of an irrevocable trust to prevent personal lawsuits from affecting homes and investments. This method also helps in post-mortem asset distribution as the trust document can guide how the property will be divided among trust beneficiaries. 

In addition to the items above, proper planning should also include adequate insurance coverage, review of available homestead exemptions, and comprehensive assessment of the individual’s unique personal and professional interests, as well as legislative changes. Safeguard assets by planning far in advance and routinely adjust plans for optimal risk management. 

North Carolina asset protection and trust attorney Gregory Herman-Giddens, JD, LLM, TEP, CFP leads a Lunch-and-Learn seminar in Chapel Hill on May 16th. Learn about risks and how you can protect yourself, your family, and your property. This is an information-packed event that will help attendees effectively adjust their plan to protect their assets. The seminar is free for TrustCounsel’s PlanGuard members. Learn more here.
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