Lawsuits are not brought against those who have few resources; they are filed against those who have "deep pockets." If you have substantial assets or unexpected income from a sudden wealth event, such as the sale of stock options, lawsuit, inheritance, the commercial sale, or the sports/entertainment contract, you must take into account several monetary movements, to better protect your new wealth from lawsuits and other unforeseen circumstances.
Below are some of the ways you can protect your financial wealth
Your first line of defense is to consider getting insurance. Call your broker and raise your liability limits. Make sure your liability coverage is at least equal to your new net worth. For example, if you receive $ 10 million from Uncle John's assets, tell your insurance broker that you want a $ 10 million general liability insurance policy. Rates are inexpensive: typically $ 200 or $ 300 for every million dollars. Some attorneys recommend that their clients have a general policy of at least $ 5,000,000 and $ 10,000,000 for some.
Note: It is recommended that you make this call five minutes before receiving the unexpected inheritance or gain.
Depending on where you live (the state) and the source of the sudden gain, if you deposit the money in a joint account with your spouse, this money can be immediately half theirs too. For some, it is not a problem, but for others, it may be a problem. For instance, if you have kids from a previous marriage and combine an inheritance you receive with your new spouse, your children may receive less than expected upon your death. This situation becomes even more damaging if you are considering a divorce.
Note: If you don't want your spouse to make unexpected profits, speak to a lawyer, and keep the resources in a separate account.
If you own a rental property or intend to invest in property after receiving sudden wealth, create a corporate entity, such as a business or a limited liability company (LLC), that will protect your other business from a displeased tenant. In this sense, if the tenant requests $ 10 million, you can attack the property of the entity that owns it, but the rest of your personal property will be protected.
Any money stored in a joint account with elderly parents, children, roommates, or business partners is in danger. If the co-owner incurs a lawsuit, or a tax lien, or files for divorce, the entire account can be wiped out.
Trade associations are time bombs. Because as a joint account, you are responsible for your partner's actions. On the other hand, unlike a joint account, a claim against your partner can put all of your resources at risk. For example, let's say you and a friend have an informal agreement to partner and provide advisory services. If your partner is involved in an accident on the way to meet a client, your personal property may be at risk.
If you have a small business or work part-time without having a formal business structure, such as a business or an LLC, you operate as a single business. "Unique" means it's only you, so unlike a partnership, you don't have to worry about a partner's actions. But all of your belongings are in danger if you are sued.
Sudden wealth can be a life-changing experience that can improve your life and that of those around you, but only if you keep it. Those with more resources are higher targets for lawsuits. Don't let your wealth suddenly disappear. Protect your funds before making an unexpected profit, and you will sleep a little more peacefully, knowing that your funds are better protected.
