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By Liza Horvath


Protect Your Assets


“When someone else is sued, it is a statistic. When you are sued, it is a nightmare.”

                                                                                    -   Hillel Presser, Esq. MBA


People often believe that a trust can provide asset protection but this is not usually the case. California revocable trusts may help avoid probate and can obviate the need for a court conservatorship. Trust planning can reduce estate taxes and may keep your hard earned assets out of the hands of a disliked daughter-in-law, but a revocable trust does not protect assets from legal judgments. If someone successfully sues you and obtains a huge judgment, a simple trust provides no help – you might as well hand them the keys to your home. It can be catastrophic. Worse yet, by the time a suit has been filed against you, it is way too late to think about protection.


Millions of lawyers hunt for lawsuit defendants – we even have a name for them, albeit derogatory, we call them “ambulance chasers.” America is the world’s lawsuit capital so why is it that so many people – smart people who carefully save, invest and aggressively negotiate to get the best deals - do nothing when it comes to safeguarding their estates from lawsuit? 


When asset protection planning is discussed some think it is only for the ultra-wealthy and, in fact, they are partially right. Many unique and costly solutions exist for wealthy individuals to shelter assets. However, each of us, irrespective of net worth, should be thinking of protection and, the good news is, there is planning that can be done from scratch to at least make it more difficult for creditors or judgments to reach assets.


Let’s be clear - asset protection does not mean that you can engage in reckless or irresponsible behavior, cause damage and simply shrug your shoulders at harm done. Each of us must take responsibility for our behavior and, if our negligent actions cause damage, we are accountable.  However, runaway juries can award disproportionate damages and the truth is that you can get successfully sued for just about anything.


Your legal, tax and insurance advisors should be consulted because asset protection is complex but here are a few things to consider: Each state has assets that are considered exempt from lawsuit. These can include IRAs, 401(k) accounts and Health Savings Accounts. The problem is that while an asset may be exempt in California, the IRS or another state may ignore our exemption laws. However, these types of accounts are a good first step in building a firewall around your assets. Community property can present special problems when it comes to asset protection. Marital assets are exposed to the creditors and judgments of our spouse. By “transmuting” community property spouses can separate assets and thereby offer some protection.


If you have a business, consider incorporation which will help shield personal assets from business debt. Other tools can include limited liability companies, irrevocable trusts, limited partnerships and, of course, insurance. Always consult with your professional advisors or seek out a reputable asset protection planning firm. Losing assets late in life is harsh – consider steps to protect yourself.    

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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