Bob and Wendy were in business together. They had created a company that was nicely profitable over the years.
Because of the economy, they had cut costs and built up over $600,000 of cash which they kept in the business, not because they needed it, but more as a financial cushion.
One day they received a call saying that one of their company drivers had run a red light and hit another car. The driver of this other vehicle died.
In addition to the emotional shock and heartbreak, they learned shortly thereafter that the company had been named as a defendant in a wrongful death lawsuit.
They called their insurance agent to confirm the coverage for this catastrophe, and were reminded that auto coverage was one of the things they had cut back on. They had some, but not enough. Their insurance agent advised them that the company would assign a defense attorney to defend them.
Some days later, they met with the attorney who requested a complete list of financial assets and liabilities for the company. Included in this list was the $600,000 in cash sitting on their company balance sheet.
They then received a complaint from the attorney for the other driver claiming damages of $5,000,000. They forwarded the complaint to their attorney and he advised them that if they proceed to trial, they would probably lose.
He suggested that they might want to engage in some planning to protect what they can, but because the lawsuit has occurred, there was little that could be done to protect assets. They were forced to hire a bankruptcy attorney to determine how much of their property could be protected from the $5,000,000 lawsuit by filing for bankruptcy. The bankruptcy attorney requested a $25,000 retainer.
They had considered meeting with their estate planning attorney to discuss asset protection, but were confident that they were protected by their insurance coverage and didn’t really have time for a meeting.
Unfortunately, scenarios like this occur every day in America. Once you have a legal problem, it’s too late to do asset protection planning. It’s like trying to buy insurance for your boat while it’s sinking in the midst of a storm. Planning has to be completed when the skies are clear, and before anyone has any possible claim on your assets. We recommend that you contact us soon to learn about your family’s asset protection options.