How to Protect Your Estate from Potential Lawsuits
In this day and age, legal exposure is something that you need to consider for your estate and financial situation. We hope that no one has to experience this type of legal action because it can be extremely difficult on your life and finances. Because of this, the best approach is to have a good defense of your estate. By having the right type of protection set up ahead of time you can be confident that your estate will withstand any potential risks and damages. There are several methods that you can consider to potentially help your financial planning needs.
While the insurance industry may not always have the best of reputations, having enough insurance can make a big difference in your financial security. The type of coverage you need depends on your situation and type of employment you have. If you are in an industry that is quiet on the legal front than an additional umbrella policy is maybe all you need. But, if you own a business, or work in an industry with a history of litigation, like medical doctors, lawyers, or dentists then you should consider an additional layer of insurance protection. There are many types of professional insurance to consider that can offer protection for your industry.
An additional approach to consider is to take all of your significant assets and transfer ownership from you to a separate business entities that you set up. This strategy is effective because if you are under legal attack the lawsuit can only pursue one person or entity at a time, and not all of them at once. This method, while effective requires quite a bit of additional paperwork and effort.
Martial Property Transfer
Another strategy that people suggest is to transfer ownership of all significant property to the spouse that does not have a position of employment that is at risk. This does work in taking assets out of any potential lawsuit, but the downside is that if divorce is ever pursued all of the assets are not in your name, leaving you potentially vulnerable to being empty handed.
A newer trend is to pursue a domestic trust where your assets are insulated from any potential litigation. However, the 2013 federal case of Waldron v. Huber exposed these domestic trusts to be not as secure as advertised. As a result of the federal case, many future trusts will be at risk of dissolving because of the legal precedent.
An additional strategy to consider to protect your estate from legal exposure is to set up different financial accounts overseas. This method allows your assets to be outside the federal and state legal purview. Often times, because of the out of country factor many claims will not gain any traction due to the expensive nature to pursue. Foreign trusts are difficult to pursue and maintain because they are expensive. You would have to the have a considerable amount of money to pursue this method.
In conclusion, there are several options to consider on how to protect you financial situation. Some of them are risky, some are expense to set up, others require a lot of detail and effort to get the protection you need. While we hope that no one needs to have this type of protection it would be better to have it in place than be exposed to legal pursuits. Consider working with Andrews & Arbenz for your Tacoma estate planning needs. We have a wealth of knowledge and experience on how to advise you on what will work best for you financial situation.