FINANCIAL PLANNING What every client needs: Food, shelter, clothing...and asset protection planning BY M A U R I C E OFFIT, CPA , E SQ . Editor’s note: This is the first of a two-part series. Clients spend their entire careers working hard and accumulating wealth. Once they’ve “made it,” their primary interest is in holding onto what they have. They also, therefore, have a keen interest in establishing an asset protection plan – a plan that will protect their assets from being legally seized and sold by a claimant who sues them. At its core, asset protection planning is a Plan B. Plan A looks like this: • Your clients don’t get sued. • If a suit is filed against your clients, win the suit. • If your clients lost the suit, have an insurance policy that will pay the claim. Plan B is everything else. Your clients need a Plan B because we live in a world that is increasingly litigious. More suits are filed in the United States than all other countries combined. Clients, therefore, need to be prepared for the possibility that they might lose a lawsuit. Otherwise, they could lose their assets. In “Henry VI,” Shakespeare wrote, “The first thing we do, let’s kill all the lawyers.” Obviously, that hasn’t occurred; there are 1.2 million lawyers in the United States. Believe it or not, there are more lawyers than (a) doctors (there are 945,000 doctors), (b) firefighters (there are 800,000 firefighters), and (c) policemen (there are 900,000 policemen).
To make matters worse, there are 15 million civil cases filed in the United States every year. This is because: • attorneys can be engaged on a contingent fee basis, and • the losing party isn’t responsible for the payment of attorney’s fees incurred by the winning party. Therefore, there is no penalty for claimants who file suits of questionable merit. Fortunately, your clients may be able protect themselves from future protection claims by having an adequate insurance policy in force. But there is no guaranty that an insurance policy will always provide protection to your clients, because: • all policies have a coverage limit (the claims filed against your clients may exceed the policy’s coverage limit); • all policies have exclusions from coverage (the claims filed against your clients may be excluded); and •
some insurance companies refuse to pay claims that they’re legally obligated to pay. An insurance company’s greatest expense is what it pays out in claims. If it pays out less in claims, it keeps more in profits.
How can you protect your clients from potential future claims? By establishing an asset protection plan. Part 2 of this series will set forth the steps your clients should follow to protect their assets from future potential creditors. Maurice Offit is co-founder of Offit Kurman Attorneys at Law. He has more than 30 years of experience as an estate planning attorney with a focus on estate and trust administration, estate planning, and asset protection plans.