March 26, 2014

If you wish to protect your money or assets or are about to receive a sudden windfall such as an inheritance, you may want to consider a number of strategies to protect yourself from lawsuits. Simple reason: “The Deep Pockets Theory”; the people with the money are the people who are sued.

Here are a few strategies, according to an article in the Chicago Tribune:

1)  Increase your liability insurance. If you are about to inherit $3 million, call your broker and increase your liability policy to protect that additional $3 million. Do it before you get the money. Rates are inexpensive.

2)  Consider separating assets. You may not want your spouse to have access to your new windfall. If you put the money in a joint account, that is what will happen.

3)  Protect yourself from renters. If you have rental property or are going to get rental  property, put the property into a business entity such as an LLC to shield your assets from a disgruntled tenant. That way, they can sue the entity for what it has, but cannot go after you and what you have.

4)  Create a trust and/or business entity to shield your assets. If you do part-time work you probably are operating as a sole proprietorship. But all of your assets are at risk if you are sued.

5)  Be careful with partnerships. If you have an informal partnership, you are responsible for the actions of your partner. Form an LLC or other entity to provide legal protection.