ASSET PROTECTION

The incredible run up in property values from 2003 through 2005 resulted in a huge increase in wealth for everyday citizens. Where before this run, the property may have been worth $150,000, after the rush, it could be worth as much as $300,000-$350,000. Although this run was great for wealth creation, it has also resulted in a substantial number of underinsured citizens. This wealth needs to be protected. The average citizen is one accident (automobile, dog bite, slip and fall, drowning, etc.) away from being on the wrong side of a lawsuit. With today’s medical costs, the victim of an underinsured homeowner’s negligence can easily get over $100,000.

If the homeowner’s liability insurance is below this, unfortunately it is time for asset protection. Imagine that you have $200,000 in equity in your home. The law allows homeowners a homestead exemption (the amount of which depends on age, marriage and disability). If you are single, under 65 and without a disability, you are entitled to a $50,000 exemption. If you are married, both you and your spouse under 65 and without disability, you are entitled to a $75,000 exemption. Finally, if either you or your spouse are over 65 or have a disability, then you are entitled to a $150,000 exemption. Let’s assume you’re married and both you and your spouse are under 65, then you have a $75,000 exemption. This means that the first $75,000 in equity is protected money. Let’s say that your $350,000 house has a $150,000 first mortgage and a $50,000 second mortgage. This means that you have $275,000 in encumbrances and exemptions which leaves $75,000 in equity available for your victim. In this situation, if your victim gets a judgment against you, a court ordered forced sale of your home is a real possibility. You need to see an attorney as soon as possible.

I am constantly surprised by the lack of sufficient insurance coverage among the general population. If you have nothing, then you can get buy with minimal auto insurance with limits of $15,000 per person $30,000 per occurrence. If you have assets, you really need to have sufficient insurance to cover those assets. If you have assets at a minimum you should have a $100,000 per person, $300,000 per occurrence policy. I have seen cases where this is insufficient. The better course would either be to increase the policy to $250,000/500,000 or better yet get an umbrella coverage up to $1,000,000. It is the rare case where a homeowner’s $1,000,000 umbrella coverage is insufficient. Before an accident occurs is the best time to plan your asset protection. Insurance is a critical part of any estate planning.

Where you have failed to insure yourself sufficiently, and you face a lawsuit, then you need to consider asset protection immediately. We can help you protect as much of your estate as possible.

Whatever you do in the face of such circumstances, think very carefully before transferring assets to family members. Once the accident has occurred, post accident transfers are often deemed fraudulent transfers. This creates additional problems for you and the recipient. Transfers prior to the accident are obviously not subject to such allegations.