If you know about Thanksgiving, chances are you’ve heard of Black Friday, too. Black Friday always takes place on the Friday after Thanksgiving. The shopping holiday offers great deals for consumers, and millions of people go out shopping on Black Friday, providing the economy with a huge boost.
Buying assets is great, but how are you protecting them? Estate planning provides a lot of ways you can protect your assets, especially from assets’ worst nightmare: a lawsuit.
Lawsuits in America
America is a litigious society. Millions of lawsuits have been filed over the years, for issues both minor and major. Big money awards usually come from class action lawsuits, and the payouts have come from major companies like General Motors, BP, Volkswagen, WorldCom, and more.
While a lawsuit you face might not be Enron-level (the payout there was $7.2 billion), getting sued can still put a huge dent in your pocket, even if the claims are baseless. If you work in an industry where lawsuits are common, or you just want to protect your assets from the worst-case scenario, consider these legal tools.
Know Your Business Entities
Keeping your personal and business entities separate is important, and, if you don’t take the steps to create a separate business entity, a dispute can cost you everything you own. An LLC or corporation provide protection against liability if you’re sued. If you own a sole proprietorship or partnership, be careful, as they might not offer protection in the event that you’re sued.
There are some professions that generate more liability than others. Professionals like financial advisors, doctors, real estate agents, and lawyers have to get insurance. Malpractice insurance isn’t the only way to protect yourself against lawsuits. You can also look into homeowners, commercial liability, worker’s compensation, and auto insurance. Shop around to get the best prices for your policy.
In Florida, for example, a $25,000 is applied to the first $50,000 of your home’s assessed value. Your home has to be your permanent residence to meet this exemption, and you have to have owned the property as of January 1st of the tax year. States protect some level of home equity across the country. So, even if you declare bankruptcy, state law prohibits the courts from giving your home to creditors.
Get Rid of It
Creditors can only seize assets that you own. No matter how bad the lawsuit or how much money you owe, a creditor cannot come for an asset that is not yours. If you are solvent and an asset transfer won’t render you insolvent, consider simply transferring ownership of your assets to irrevocable trust. You can also give away assets as gits. Tax laws allow for some amount of exclusion, based on how much you give.
If an asset means a lot to you and you don’t want to see it taken away by creditors, giving it away might be your only choice. If it’s financially doable for you, it’s an option.
Of course, you don’t want to wait to do any of this. It’s too late to transfer once the judgement is rendered. You want to take these steps now if you believe you’re at a high risk of lawsuits. Even if one doesn’t happen, preparedness is still the best option.
Even the word “lawsuit” is enough to make some peoples’ skin crawl. Luckily, there are ways you can protect yourself from going broke in the event of a lawsuit. Contact an estate planning attorney to put some of these tools into action.