Do you have cash available? How to protect yourself from lawsuits

Margery experienced great success with her business as an influencer. Over the years, she has accumulated significant balances, well over six figures, in her business bank account…until she was sued.

As an influencer, just one innocent but dismissive statement about an ongoing business concern can land one as a defendant in a business tort claim. Because it is almost always less expensive to settle a liability case than to take it to trial, and without a commercial liability policy as a safety net, Margery decided to go that route. Unfortunately, she had to settle for more than she bargained for due to the sheer amount of his liquid assets. Deals are usually covered by a confidentiality and non-disclosure agreement, but one can assume he was well into the six figures.

Hoping to better protect herself from predatory lawsuits in the future, Margery sought the advice of her trusted advisors, including her estate planning attorney. Her attorney advised her to move as much of her liquid assets as possible from her home state of California to an Asset Protection Trust (APT) domiciled in one of 19 states* They offer asset protection trusts. You should keep the remaining funds in a Delaware bank or trust company, the attorney advised.

Why Delaware?

For more than 150 years, Delaware law has prevented the seizure or garnishment of funds deposited from any of its banks, trust companies, savings institutions, or loan associations. This law was enacted to allow these types of accounts to do what they were intended to do: grow. The types of institutions that want to manage investments but will also allow liens on their deposits are not conducive to investment management.

Margery agreed that there was no practical reason to keep her assets in California. She painfully learned that lesson and now has an asset protection trust deposited with a Delaware trust company.

New lawsuit ends with better result for Margery

A year or so after setting up her new trust, Margery was hit by another lawsuit from another opportunist seeking to use “law warfare” for a quick settlement. Her attorneys quickly pointed out to the plaintiff’s attorney the difficulty they would have in collecting a judgment, even if they won the case. Litigation is very expensive, and plaintiffs are unlikely to sue if there are questions about collectability.

Margery was able to settle this case for an upset value sum (in our experience, settlements are typically under 10% of the amount sought) and was happy to oblige.

Margery remains confused as to why her attorney didn’t talk to her about setting up an asset protection trust and setting up a Delaware bank account before she was first sued. But she was glad she had put a plan in place long before the second lawsuit was filed.

Successful business owners have great exposure and are at great risk of being sued, as Margery learned the hard way. More than 15 million lawsuits are filed annually in this country.

If you’re looking to protect your legacy from predators, consider an asset protection trust and a Delaware bank or trust company to hold funds for added peace of mind.

*The 19 states that allow home asset protection trusts are Alaska, Connecticut, Delaware, Hawaii, Indiana, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia and Wyoming.

Managing Partner, Jeffrey M. Verdon Law Group, LLP

Jeffrey M. Verdon, Esq. is the managing partner of the Jeffrey M. Verdon Law Group, LLPa boutique law firm of Trusts & Estates located in Newport Beach, California. With more than 30 years of experience designing and implementing comprehensive estate planning and asset protection structures, the law firm serves wealthy families and successful business owners to solve their most intricate and complex issues. Confounding goals and objectives of estate tax, income tax, and asset protection.

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