Although no one is immune, certain professionals such as attorneys, physicians, financial advisors, and business owners are much more inherently exposed to lawsuits. Because of this, it is extremely important to have a clear financial and estate plan in place so as not to put yourself or your family at any additional risk.
It may appear as though occupations such as physicians and attorneys are at a higher risk for medical or legal malpractice respectively, risks that can be addressed, at least in part, by appropriate malpractice or other insurance. What many would be surprised to learn is that these cases are not the biggest threat that they face. They are more at risk from automobile accidents, divorce, poor tax or business planning, or bad investments.
Insurance and Business Entity Choice
Luckily, you can help to protect your personal and family assets from any threats to your practice by having appropriate professional and personal insurance and by selecting the right business entity for you. Doing so can maximize both your short- and long-term success.
We mentioned malpractice insurance above for doctors and lawyers. Other professionals can get protection for their business actions by having errors and omissions (E&O) insurance or other professional liability coverage. In addition, business owners should also have substantial umbrella liability coverage on top of significant personal liability insurance. Umbrella insurance is usually very inexpensive and you can get millions of dollars of coverage for a reasonable fee. Insurance companies can offer reasonable rates on this type of insurance since an umbrella policy only pays a claim that is beyond your regular insurance coverage so is in the nature of a low probability but potentially very costly incident. Some umbrella policies will cover business activities and certainly those who own real property that is leased should have a high dollar umbrella policy.
But beyond the essential insurance coverage, many professionals often choose to operate as a sole proprietorship or general partnership (if they are a co-owner). This can be a good choice for some, but offers essentially no protection for claims against personal assets for claims that exceed (or are not covered) by any insurance policies. It is better for for at-risk professionals to create some form of business entity beyond a simple sole proprietorship or partnership. A business entity, if treated like a business and not a personal “piggy bank,” can offer significant additional protection from liability. The most common protective entities for businesses include corporations, limited liability companies (LLCs), and limited liability partnerships, with LLCs rapidly become the most common form of business entity.
At Reilly Law, PLC we can work with clients who want to set up an LLC or be a resource to those clients to get them to the right professionals to assist them with their business entity formation.
Can Trusts Provide Protection?
Although the standard Revocable Living Trust we prepare for clients for estate planning purposes does not offer any asset protection as it is simply your alter ego, the process to develop your RLT plan is a great opportunity to examine your situation and explore planning options that may offer some asset protection or at least risk management.
Beyond the risks for our clients themselves, this Peace of Mind Planning process is a time to consider other risks that could have an impact on your financial future and that of your family members. We all have heard horror stories of divorces completely undermining well-thought out financial and estate plans. Similarly there are countless stories of second (or third or later) marriages not having the right kind of planning in place and the unintended consequences and hard feelings that are the result. And not to forget the concerns of many clients of their children getting an inheritance that is lost in a divorce. These “future ex-in-laws” can reap the benefits of your hard earned money. Not many of our clients have ever wanted that result. There are planning tools to help ensure that your intentions are actually followed and appropriate asset protection is in place.
There are some asset-protective tools include a Domestic Asset Protection Trust or a Third Party Settled Spendthrift Trust. If an individual legally transfers his or her assets to one of these trusts, these assets will then be protected should someone bring a claim against the professional or his or her business. However any asset protection trust is at risk of being rendered useless if created too late or not operated in accordance with the applicable law. The best time to create an estate plan is yesterday. The next best time is right now. You cannot wait until you are faced with a lawsuit to start planning. It is important to remember that asset protection is only effective if it is out in place before any threat.
Reilly Law PLC Helps Clients Who Are Interested in Protecting/Preserving their Assets Through an Estate Plan
You’ve worked hard for the success of your business, your assets, and all that you own. Do not risk having to give it all away. Do something about it. The best way to properly protect your business assets is by consulting with a knowledgeable and experienced Estate Planning Attorney as soon as possible.
At Reilly Law PLC, we understand the importance of protecting what should be yours. We will help you to create an estate plan that meets your needs and keeps you protected. To learn more or to schedule a free consultation, call Reilly Law PLC at 703-579-1936 today!