Why should I be concerned about protecting my assets from creditors if I have none now?
Because many sources of potential liability exist in our lives, and we cannot know when anybody will change from a potential creditor to an actual creditor. Here are a few examples, but the list is not exhaustive;
1. An owner of real property, such as a landlord, for injuries that occur on the property. This is true even if the owner is merely using the property as an investment;
2. A homeowner can be held liable for accidents that occur around the home (including injuries to workmen paid to work on your home);
3. A person could be held liable for damages caused by someone for whom the law deems you responsible (e.g., employees, children, subcontractor, joint-tenant and partner), even though you may believe you lack enough control to be held liable;
4. A person can be held liable for negligence as an officer or director of a company, such as lack of due care to provide proper oversight of employees;
5. A physician, lawyer, engineer, dentist, architect, and may other professionals can be held liable for negligence in the performance of his profession. Mistakes are inevitable, and sometimes a decision or action can be portrayed as negligent when a bad result occurs, even though due care and good judgment were exercised by the professional;
6. Dissolution of marriage leads to financial obligations to the ex-spouse;
7. Liability from serving as trustee of a trust or personal representative of a probate estate;
8. Environmental “Superfund” and other such obligations relating to pollution of real property; or
9. Contractual exposure, such as personal and business loan guaranties.
Structuring the manner in which assets are owned may significantly reduce the risk of liability exposure.
1. Certain types of property are exempt from execution by most judgment creditors.
2. Interests in certain business entities cannot be foreclosed upon if they are executed upon by a judgment creditor.
3. Certain types of trusts offer protection to beneficiaries from most judgment creditors.
4. Premarital agreement can protect your assets from spouse.
5. Liability insurance can protect you and also pay to provide legal defense.
6. Ownership of investments can limit your exposure.