What Assets Can Be Taken in a Lawsuit
High net-worth individuals must take action to protect their assets from not only frivolous and contingency based lawsuits but today’s modern problems, especially in our litigious society. Lawsuits can target various assets like cash, real estate, personal property, stocks and bonds, and other investments, with the type of lawsuit dictating the asset at risk.
If that isn’t problematic enough, courts can seize assets to satisfy judgments and allow creditors to attach liens to property owned by the defendant. Understanding wealth management solutions and safety nets, such as trustees to protect assets, can help an individual fu-ure proof their hard-earned wealth.
The court can take many assets, such as cash, real estate, stocks, mutual funds, annuities, and retirement accounts. But with the help of a wealth advisor, individuals can not only navigate important tax and estate planning issues, but they can ensure the safety of what they currently own.
Here are a few examples:
Cash is the most targeted asset in a lawsuit, since it is both liquid and easy to obtain. Individuals named in a lawsuit may be able to protect some of their cash assets if they have taken initial steps to shield those funds from creditors. Attorneys for the plaintiff can receive a court order to garnish wages or seize bank accounts.
Real estate can be seized to pay off debts in a lawsuit. This includes primary residences, vacation homes, rental properties, commercial properties, and undeveloped land. Certain types of real estate are exempt from seizure in some states in a lawsuit. It’s essential to understand the laws in your state regarding which properties are exempt. A wealth advisor can assist with strategies to help individuals protect any real estate from being seized in a lawsuit.
You can also consider using insurance policies or transferring real estate ownership to an LLC (or other entity) to protect it from being seized in a lawsuit.
Investing in stocks and bonds is another popular way to grow wealth, but the risk of losing money is high and can be an easy target for asset seizure in a lawsuit. In a legal dispute, creditors can take stocks, bonds, or other financial investments as part of a judgment. A financial advisor can offer solutions such as a trust or using other asset protection strategies that can help safeguard your investments from being taken during a lawsuit.
Asset protection strategies
There are several strategies a financial expert may recommend when helping individuals protect their assets against a lawsuit. A few examples include:
- Creating a trust or other type of entity
- Using insurance to cover potential legal costs
- Making sure any business activities are conducted in a compliant manner with all relevant laws
- Setting up retirement accounts such as a 401(k) or IRA
The most important thing to remember is that it is important to speak with a professional wealth advisor to ensure that your assets are adequately protected from lawsuits.