By JLP | October 17, 2007
Cute title, eh?
Today’s Getting Going column, Protecting Your Assets in Case You Find Yourself in Court (Free), reminded me of my own story…
Several years ago I was involved in a fairly minor fender-bender. The lady that I ran into (the accident was my fault) got out of the car and was standing on the side of the road. She appeared to fine, just a little put out by the whole deal. She was a runner for a local dental office and the car belonged to her employer. Anyway, she told me that she had been involved in another accident not to long before our accident.
Everything seemed to be fine and dandy and I had actually forgotten about the deal until a year later when I got a call from my insurance company telling me that I was being sued. The lady claimed her foot was broken during the accident and that she was suffering from a back injury. I was both scared and ticked off! Her foot was perfectly fine when she was standing on the side of the road! Her lawyer was a TOTAL jerk (as most of those kinds of lawyers are). I could tell that they were just looking for a nice little payday and that this suit was bogus.
Anyway, the case was eventually settled for a relatively small sum of money but it scared the daylights out of me. I mean, what could have happened if this case had gone to court and a judgment was found against me that beyond what my insurance company would pay? I could have lost my entire CD collection! LOL!
Seriously though, Jonathan’s column offers up five ways that people can protect themselves:
1. Get a personal umbrella policy. This is a no-brainer. You’ll have to increase your auto coverage before you can purchase an umbrella policy. However, once you do that, you’ll find that the umbrella policy will only cost you $200 – $400 per year. That’s cheap insurance.
2. Max out your retirement plans. According to the article, your 401(k) should be protected from creditors. I’m not sure why the word “should” is thrown in there but it is.
3. Know your state’s laws. Jonathan suggests typing in your state’s name and the words “asset protection” to find out more information on your particular state. It might also be worth it call your attorney and ask them the basics.
4. Consider owning assets jointly with your spouse. Consult your attorney before you make any title changes because some changes could mess up your estate plan.
5. For those who have assets of $5 million or more. Clements suggests looking into more sophisticated protection like trusts, limited partnerships and limited-liability companies. For those, you’ll definitely need an attorney.
Clements also mentions a book that might be helpful on this topic: Asset Protection: Concepts and Strategies for Protecting Your Wealth (Affiliate Link). I haven’t read this book.