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How to Protect Your Assets Against Unexpected Litigation

“Can you pay for your legal defense?”

This is a question that each person should be concerned with. Debt, medical bills, and other expenses can easily cause any one of us to lose everything we own because of unexpected litigation.

While it’s impossible always to avoid this type of risk, there are several steps you can take to protect your assets better—your children, parents, homes, cars, bank accounts, etc. so that you’re able to focus on staying ahead of accidents instead of worrying about the aftermath.

Steps 1 & 2: Insurance & Preparation

One of the first things everyone needs is insurance. If you drive a car or bike (or if someone else does), then auto insurance should be at the top of your list. Homeowners insurance is also a must, as it provides coverage for the building and its contents in the event of damage related to natural disasters such as floods or fires.

If you own a business, then commercial property and casualty insurance ensures that your business interests will be protected if lawsuits arise due to bodily injury claims, product liability claims, etc.

Finally, don’t forget about life insurance! This important form of protection helps provide the financial support your family needs after you pass away, so they won’t have to worry about how they’ll pay for things like funeral expenses or medical bills during difficult times.

Step 3: Wills

Next on the priority list is having a lawyer draft up a will. The last will and testament outline the distribution of your assets, so you must have one in place to ensure your loved ones are taken care of when the unexpected happens.

It’s also important to name guardians for your children if something were to happen to you. At the same time, they’re minors, which is why they will typically contain a provision detailing who will serve as your child’s legal guardian if both parents are no longer around.

Step 4: Family Financial Agreement

If someone is dependent on you for financial needs—your children or elderly parents, for example—then it’s wise to make them a part of this process by creating a family financial agreement with their input.

The most important thing about these agreements is that everyone understands what they mean and is aware of what’s expected if the unexpected occurs.

Make sure you know what assets they have access to and that your agreements with them align with your goals, as well as those of their other family members (if applicable).

By making this process formal and having it reviewed by a lawyer, you’re ensuring that everyone is involved, up-to-date on the rules, and aware of how to follow them should something happen.

Step 5: Asset Protection Trusts

money, gavel, and handcuffs

Asset protection trusts are an excellent way to protect property from future judgments or creditors. For example, say you own a business jointly with your father and another person—and that one day, the third party decides they want out.

If he sues you for breaching an agreement, the courts may order you to pay him a lump sum of money. However, if you transfer your portion of the business into an asset protection trust before the lawsuit is filed, then that judgment won’t be able to come after it.

This strategy works well with business interests because asset protection trusts are typically set up for this specific purpose—and they can also help you reduce estate taxes!

Step 6: Avoid Litigation

Of course, the best way to protect your assets is by avoiding litigation in the first place. There are two general categories of legal disputes that may arise—those involving contracts and those involving torts (not necessarily related to contracts).

When it comes to contracts, make sure you’re familiar with the provisions in them before signing on the dotted line, so you don’t have any surprises later on down the road.

If you have a dispute, consider working things out outside of court first. If not, then be prepared for a lengthy process that could result in someone being awarded damages or an unfair contract provision being upheld.

Step 7: Seek Legal Counsel

Finally, remember to seek legal counsel from a reliable trust lawyer so you can get their advice and ensure your plan is correctly set up.

If you have family members dependent on your income or property—or if you own land or property in another state—then it’s imperative that you get the proper protection in place, whether via wills, trusts, insurance policies, etc.

The last thing you want is for your hard-earned assets to go down the drain because of an unexpected lawsuit!

The best way to protect yourself is by having a long-term plan in place that sets your family up for success. A good strategy takes time and effort, but the benefits will be well worth it when something unexpected happens.

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