Be forewarned: this is the scary post. This is the post that will challenge what many Americans assume to be true – that their hard-earned wealth and assets are, generally speaking, safe from greedy hands. That insurance policies and LLC’s and other legal structures automatically offer enough protection that additional steps are unnecessary. Even the assumption that having very little in assets to begin with is somehow protective against financial ruin.
The truth is, an unfavorable judgement in a lawsuit against you or your business can result in the loss of everything you have saved, everything you own of value, and even that which you might earn in the future. Insurance companies carefully craft their policies with exclusions, and have teams of people who try to find a reason to not pay out a claim. Or, the judgement amount may far exceed the limits of your insurance, leaving you exposed for the remainder. And for those just starting their careers or businesses, not having wealth or assets is not protective, either. Lawsuits can result in a judgement attached to your future earnings and assets, haunting you for years to come.
In particular, California courts and judges are known to be particularly tough on defendants. The American Tort Reform Foundation’s “Judicial Hellholes” program has ranked California #1 for three consecutive years, slipping only one spot to #2 last year. Since 2010, California has added an average 830 new laws per year, making it virtually impossible for a resident or business owner to keep up with all the changes and effectively protect themselves from lawsuits.
A conscientious, well-intentioned, law-abiding citizen doesn’t intend to break the law or conduct themselves or their business in a way which might land them in court, unsuccessfully defending themselves against a greedy creditor, fighting a losing battle with their insurance company, and ending up stripped of their hard-earned savings and assets. But this happens every day, and California residents particularly need to be proactive and educate themselves about what specific asset protection strategies are available to them.
Stay tuned for our next post in this series!
Scott, R. K. (2017). California asset protection guide: The NON-legalese California business owner’s & professional’s guide to asset protection & tax planning. Retrieved from https://app.luminpdf.com/viewer/ne6hiAMBas6o4tzmZ
Judicial Hellholes: California (2017). Retrieved from http://www.judicialhellholes.org/2017-2018/california/