When Attorney “X” completes his initial consultation with an injured potential client, he’ll assess the damages suffered and add in the cost (and potential profits) of his firm should he decide to take the case.
The very first move he makes is to look for evidence of insurance to cover part, or all of his client’s damages, as well as pain and suffering if warranted by law. Liability coverage – coverage that is, held by the defendant (YOU), is only part of his search. Next, he’ll determine what, if any, your personal assets total up to in worth.
You’ve heard the expression, “Can’t get blood from a turnip”? A turnip represents the case that an attorney turns down for lack of available assets to achieve a financial win for both his firm and his client. A turnip simply costs more than the case is worth to pursue in court.
No one would suggest that you shirk away from living life as a responsible individual with at least some liability coverage, but lets face it; in today’s sue-happy world, YOU WANT to be a TURNIP!
A legal defense is an expensive proposition and clearly, attorneys can ill afford cases that don’t offer enough compensation to cover their clients, as well as court costs, investigations, staff time and a profit margin …they too, after all, are a business.
Furthermore, a successful plaintiff’s firm needs a lot of low-hanging profitable fruit to afford big cases that can take years to win and are expensive to prosecute on a contingency bases – if they lose, they also lose their fee. Cases with good liability insurance and unprotected personal and business assets are such low-hanging fruit.
As more consumers strive to reduce premium costs, many keep liability coverage to a minimum, which creates an even greater risk of their unprotected personal and business assets falling under siege as well.
Others, seeking greater protection from liability, increase overall insurance with an additional, cost-effective umbrella policy -- an added layer of liability coverage for their home and auto, usually to the tune of $1 to $2 Million. This is an attorney’s dream opportunity, of course, and can turn a rather small case into a large one very quickly.
In most cases, the amount sought in the suit will include the “limits of liability” afforded by your standard, baseline insurance policy, adding to that amount, the limits of your umbrella coverage. Lastly, just in case you think you’re in the clear with all that expensive insurance protection, he’ll assess any assets you hold personally, including your home and business.
If your pockets run deep between personal/business assets with verifiable equity, you can bet the settlement amount requested will exceed your insurance, if for no other reason than to provide a winning strategy for a high, out-of-court settlement negotiation.
Own Nothing…Control Everything. ~ John D. Rockefeller
Multi-million dollar settlements today are a commonplace. Imagine a scenario where an auto accident is determined to be your fault, leaving another severely injured and unable to work for a year or more. The financial damages, including necessary hospitalization and recovery costs, loss of wages, etc., could easily exceed your insurance coverage, even with an umbrella policy. Next in line would be your home, your business, YOUR LIFE.
By utilizing proper incorporation strategies to protect your business assets, your overall personal wealth on paper is greatly reduced. Furthermore, by placing the title to your home into a structured Family Limited Partnership, your most valuable personal asset would be untouchable, leaving only the limits of your liability insurance for the taking.
Remember too, liability insurance does nothing to protect you from a lawsuit based upon other grounds (beyond accidents), such as disgruntled employees, etc. However, a business properly incorporated along with a Family Limited Partnership can protect you from loss in these cases as well because you control the assets, but don’t own them personally.
While you may be able to reduce insurance premiums by lowering your overall liability coverage – recommended only when your assets are fully protected – basic liability coverage continues to be prudent (mandatory in most states) and in most cases, will force an attorney to simply deal with your insurance carrier for any settlement achieved.
And by the way, while you’re breathing a huge sigh of liability relief after protecting your assets now, allow yourself a moment to reflect on beneficial estate planning associated with true asset protection that you’ll continue to enjoy for years to come.
If you're serious about putting together a plan to protect the assets you have worked hard to build up for you and your family give us a call, don't wait until it’s too late. We can be reached toll-free at 1 (877) 652-1868 for more information.