What Assets Can Be Taken In A Lawsuit?

If a lawsuit has been filed against you, then you may want to take a check-in with your assets before you wait for the decision of the court.

What assets can be taken in a lawsuit?

The answer to this is: all of your assets can be taken under a lawsuit. You may not even be considering certain assets are at risk until you get the seizure notice.

What assets can be taken in a lawsuit? The list below outlines all the potential assets at risk from a lawsuit:

1. Your Car
2. Your Home
3. Your Life Savings
4. Your Personal Assets
5. Your Liability Claims
6. Your Salary
7. Your Stocks And Bonds

Most people consider their seizable property to include only real estate. This is one of the biggest mistakes defendants make. Anything that you own, that is in your name and that you have a right over, is a potential seizable asset.

Asset Protection After Lawsuit Filed

Asset protection should be an essential practice for certain professionals, like doctors, insurers, architects and builders. Most people do not give it any value until their assets come under fire. Asset protection should be a move before you are named in a litigation claim.

However, if, like the majority of people, you failed to provide sufficient protection to your assets, you may have to take quick action after the lawsuit is filed. Asset protection within the US after the lawsuit is filed is simply out of the question. If your creditor is able to link your efforts for asset protection were done intentionally after your lawsuit was filed, you can have charges of fraud coming your way as well.

International asset protection strategies are your go-to after the lawsuit has been filed. By opting for an international trust, you basically take away your court’s jurisdiction over your property. They no longer have the authority to seize your assets directly as they do not have jurisdiction. The most common and effective international asset protection strategy includes establishing an offshore asset protection trust. There are almost 43 offshore destinations around the world which will keep your assets well-protected with zero or little tax. You have a wide variety of countries to choose from including The Bahamas, The Cayman Islands, Switzerland, Belize, The Island of Jersey etc. Offshore asset protection trusts have full ownership of a limited liability company or LLC, which basically means that once your assets are part of the company, they are not liable or answerable for your debts to anyone else. Peace of mind – guaranteed!

Moving Assets During A Lawsuit

Moving assets during a lawsuit are near to impossible. The legal implications with moving an asset after you have been named in a lawsuit are too great to attempt to do this. You may be charged with a fraudulent conveyance or fraudulent transfer that is considered a civil offence and carries heavy fines and seizure of property. A transfer is considered fraudulent if you attempt to sign over or transfer property in the name of your spouse, child, relative, company or any other entity to avoid having it confiscated by the creditor. All transfers are deemed fraudulent once the creditor has filed his or her claim against the debtor.

Asset Protection Strategies

There are a number of asset protection strategies that you can choose from to secure your hard-earned income.

1. Umbrella Insurance: Let’s say you have auto insurance and your child gets into an accident. If the damage claims exceed your coverage, the plaintiff could come after your property to pay for the rest of the damages. Umbrella insurance can save the day in such a situation. If you max out in your insurance coverage, umbrella insurance covers the rest up to the limit of your policy. They are usually affordable and can be underwritten from $1 million to $5 million in face value.
2. Corporations: Corporations are a great way to keep your money safe. Unless you are part of an outstandingly awful fraud like tax evasion or not differentiating between your personal and your corporation’s expenses, a lawsuit against your business will not be able to take away your assets.
3. Retirement Accounts: Retirement accounts offer a great way to keep your assets safe for use until after you are 59. Plans under The Employee Retirement Income Security Act (ERISA) of 1974 are fully protected under federal laws against all lawsuits. Some states also provide protection to regular Individual Retirement Accounts. If your state offers a good level of exemption, you should think about moving any savings you don’t need till you’re 59 into these accounts.
4. The Homestead Exemption: The homestead exemption is a law that exempts a certain amount of the value of your home to be taken away in a lawsuit. Essentially, what this means is, if you lose a lawsuit and the creditor comes after you for payment, they will only be able to take the amount left after paying off the selling fees, the left-over mortgage, and the homestead exemption. Hence, you do retain some amount of your hard-earned income even if you lose.
5. Tenancy Options: Joint tenancies and tenants by the entirety are two different ways to protect your property with your spouse. These options only work on personal property, usually residences. The joint tenancy with the right of survivorship provides partial protection only. If you lose a lawsuit, only the part of the residence that belonged to you can be claimed by the creditor. Tenants by the entirety, available for spouses only, offer much comprehensive protection. Creditors have no right to seize or claim real estate held as tenants by the entirety, as this offers complete ownership to both the spouses. What it essentially means is this – if one spouse is indicted in a lawsuit and has to pay claims, the other spouse should not have to suffer for something they were not responsible for. It should be kept in mind that these tenancy options are only available in certain states and might not offer good long-term protection.
6. Minimum Ownership: If you are in a high-risk profession, you may want to keep the ownership of assets under your personal name to a minimum. There are legal tools in place that help keep your personal name out of the ownership or title deed of your assets, hence making it very difficult for the creditor to find an eligible property to sue you with. For example, you may own a car in a title holding trust that keeps your name out of public records. Or you may own rental property in a land trust that gives you the privacy of ownership. Minimum ownership does not mean you don’t own anything – it just means you own smartly and in a way that makes it difficult for anyone to take it from you.
7. Limited Liability Company: A limited liability company provides a shield to the personal assets of the business owner so that they are not responsible for claims to lawsuits against the company. LLC owners are generally called members.
8. Asset Protection Trusts: This is perhaps the most effective method of protecting your assets from creditors. Given their importance, we discuss them in detail separately.

Asset Protection Trust

An asset protection trust is a special kind of financial planning tool to provide protection to a person’s assets from creditors. It is perhaps the most important way of securing your assets and is a deterrent for potential lawsuits. Creditors will think twice before they choose to pursue your assets placed under an asset protection fund.

How Does An Asset Protection Trust Work?

The asset protection trust or APT allows the grantor to be a legitimate beneficiary of the trust. What this means is that the person who is placing his assets in the trust has a right of ownership over them as well. A well-structured APT will keep the assets well away from the prying eyes of potential creditors. APT’s are created in such a way as to make them irrevocable i.e the terms and conditions that they are built upon cannot be changed without the permission of the grantor.

There are two types of APT’s, domestic and foreign.

Domestic Asset Protection Trust Funds

Domestic asset protection trust funds, also known as self-settled asset protection trust, besides securing your property, may also provide income tax savings in certain states as well. As of now, only 17 of the 50 states allow the creation of APT funds.

The biggest con to self-settled asset protection trust is that it is not out of the jurisdiction of the US Legal System. Since the assets are within the geographical limits of the US, they are still liable to be seized under court orders.

Foreign Asset Protection Trust Funds

Foreign asset protection trust funds or offshore accounts are created in locations where the US has no jurisdiction. Some popular destinations for creating a safe and secure offshore account include The Cayman Islands, The Bahamas, Panama, British Virgin Islands etc. The lack of jurisdiction that US courts have over these APT’s makes it very difficult for creditors to claim them.

In short, all your hard-earned assets are at risk of being seized by unforeseen lawsuits. No amount of protection guarantees that your assets will be 100% safe – it just means that creditors will have to do a lot of work to get a hold of them. You should never wait to secure your hard-earned property but take steps to shield it from predatory lawsuits now.