Asset Protection and Preservation

from Masker Insurance

You worked hard for your assets.  Seems like they are under assault from all sides these days.  If you work in a high risk profession, you can lose everything you own in a lawsuit.  Have you taken the proper steps to protect your assets?  Think having everything in your spouses name will do the trick?  Or off shore?  Think again.

We can help you properly structure your asset protection to make sure you keep your assets. Take a look at the anatomy of a lawsuit, then give us a call to see how we can help.

Anatomy Of A Lawsuit

You have probably heard of the terms legal extortion, lawsuit lottery and litigation explosion before. Such is the dismal state of our legal system in the U.S. If you own real estate, a business or practice a profession, your chance of being sued this year is one in three!

To better protect your assets from a potential lawsuit, it is important to understand the legal process so that you are better prepared in the event you are sued. What we have outlined here is the general step-by-step process of a lawsuit. The court and collection process in each state, county and city is going to differ slightly so some of the steps might not be the same in your particular jurisdiction. In any event, we are talking about civil cases filed in state courts and not criminal cases or bankruptcy cases.

1. The plaintiff (the one who is suing you) suffers from some real or imaginary injury or property damage he thinks you’ve caused (such as a car accident) or he suffers from a financial loss because of your action or inaction (such as not paying your bill or breaching a contract). The plaintiff seeks legal counsel.
2. To take on the case, the lawyer has two options in terms of fees: (a) he can ask for a retainer in thousands of dollars to make sure he gets paid first for pursuing the case plus his hourly fee after the retainer is exhausted; or (b) common with personal injury cases, he can offer a contingency fee arrangement. In a contingent fee arrangement, he pays for all the expenses, if he wins the case for the plaintiff, he gets typically 30 to 45% of the judgment collected. If he doesn’t win the case, he gets nothing. Now a lawyer wants to get paid for his work just like any professionals. To pursue a case, aside from his time, there are out-of-pocket expenses like court costs, document filing fees, process server fees, etc. For the lawyer to take a case on a contingent fee basis, he has to be quite sure of three things: (a) the contingent fee from the court judgment or an out-of-court settlement is worth his time and expenses, (b) he has a decent chance of winning the case in court or a great chance of getting an acceptable settlement (remember the term legal extortion?), and (c) you, the defendant, have sufficient assets and/or applicable insurance coverage that can be used to pay the settlement or the judgment if he wins the case.
3. The lawyer orders an asset search on you and even your family members from a private investigative firm. The larger the amount of the lawsuit, the more extensive is the asset search. The asset search reveals all the real estate you own, all your bank accounts, brokerage accounts, your vehicles, boats, your employer and the businesses you own.
4. If you have little or no assets, the lawyer won’t offer him the contingent fee option and he will ask for thousands of dollars in an upfront retainer. Now the plaintiff will have to decide whether to pay the retainer or drop the case. Many will simply drop the case rather than to shell out thousands of dollars for a potential no-win scenario. On the other hand, if you have plenty of assets, regardless of how frivolous the case is (remember the term lawsuit lottery?), the lawyer might go for a contingent fee arrangement.
5. If a lawsuit is filed and you are served, you and your defense attorney might sit down with the plaintiff and his lawyer to settle before the case goes to trial.
6. If the lawsuit involves a certain residential real estate property you own, the plaintiff attorney might file a lis pendens to encumber your property while the suit is being pursued. A lis pendens is a notice to the world that a lawsuit is pending regarding that piece of property and whoever acquires an interest in that property after that lis pendens such as a mortgage or a purchase is subject to the outcome of the lawsuit.
7. If no settlement is reached and the suit goes to trial, the judge and/or the jury decide on the outcome and the judgment amount. If you win, you are in the clear. If the plaintiff wins, a judgment is issued by the court for an amount you must pay to the plaintiff who becomes your judgment creditor.
8. The lawyer for the judgment creditor demands that you pay the full amount of the judgment in writing.
9. You have the choice of paying the full amount of the judgment or offering to settle for something less. For how much less the judgment creditor is willing to settle depends on how much assets he thinks you have. If he knows you have a great deal of assets that can be easily seized such as personal bank accounts, brokerage accounts and equity in your real estate, he will be less likely to settle for a lesser amount. If he thinks you have little assets and it costs a great deal more to dig deeper to find and seize any additional assets, he might be more willing to negotiate.
10. If no settlement is reached and you are unwilling to pay, the judgment creditor will need to find ways to collect. The court is not a collection or enforcement agency so it will not collect on your behalf. To get money from you, the judgment creditor must first identify your assets to attach or seize. He most likely already has done an asset search on you. To further help in the identification of assets, the judgment creditor asks the court to issue an “information subpoena” to force you, your family members, your employer, your bank, etc. to disclose all the assets you have.
11. After your assets are identified, the judgment creditor can do the followings to collect on his judgment: (a) file judgment liens on all your real estate properties. The judgment lien will be subordinated to any exemptions such as homestead exemptions and prior liens from your mortgage lenders or other lien holders, (b) ask the county sheriff to freeze and then ask the court to order the banks to turnover any bank accounts and brokerage accounts to him, (c) ask the county sheriff to seize your personal properties such as cars, boats, planes and other identifiable assets and conduct an sheriff auction. Only those assets that are not exempt by law (e.g. work tools, vehicles up to a certain value and retirement accounts in some cases) or without lien holder interest can be sold at auction, (d) request to have your wages garnished, (e) force you to hand over shares in any companies you own or obtain a charging order from the court to charge your interests on any LLC’s or limited partnerships, and (f) ask the court to force the trustee of any trusts in which you have an interest to turnover assets to pay the judgment.

As you can see from the process, how much you can lose partly depends on how much personal asset can be identified or traced to you. If most of your assets are in a “private” Nevada corporation/LLC or an offshore company, many lawsuits might not be filed in the first place. If a lawsuit is filed against you, you would be in a superior negotiating position that could drastically reduce the amount needed to settle the case. This article is not intended to replace legal advice from your personal attorney nor is to be construed as tax advice. 

This article came from:email: assetprotectionnews@apcg.net  web: http://www.apcg.net

US Income taxes may not be avoided using this or any other information on this site.  We can help you reduce them legally though!  561-212-8479