The purpose of this article is to explain (1) why all small business owners and successful people need an asset protection planning strategy, (2) why products such as liability insurance are insufficient on their own to preserve your wealth, and (3) how a proactive approach with your attorney can make your assets safer (but they will never be 100% safe).
More risks to your wealth than ever.
Asset protection planning is more important than ever. Over the past 25 years, numerous social factors have resulted in unprecedented risks to personal wealth. Lawsuits are a big part of it. In 2006, there were 5,806 lawsuits filed per 100,000 Americans. In contrast, in that same year there were only 1,542 lawsuits per 100,000 Australians, 1,450 lawsuits per 100,000 Canadians, and 1,768 lawsuits per 100,000 Japanese. Our car insurance rates are three-times greater than what Australians pay, and we have 1 lawyer for every 250 people. We Americans are quick to take our disputes to the courts.
Even worse, punitive damages are asked for and granted in increasing numbers of cases. Two Duke University law professors published a study of all jury trials conducted in the United States in 2005. They found that there were requests for punitive damages in 45% of slander/libel/defamation cases, 38% of real estate disputes, 36% of employment discrimination cases, and 6% of personal injury and car crash cases. Punitive damages are almost unrelated to the actual damage caused and can reach into the millions or tens of millions of dollars range.
Liability insurance helps but is not a complete solution.
Your insurance policies do not cover punitive damage awards that are directly assessed against you. Since 1981, Illinois courts have consistently held that public policy prohibits insurance coverage for punitive damage awards. See Beaver v. Country Mut. Ins. Co., 420 N.E.2d 1058 (5th Dist. 1981) for a discussion of why Illinois courts believe punitive damage insurance is contrary to public policy.
Choose an attorney with experience crafting asset protection strategies for his clients.
Every asset protection strategy must be custom-tailored for the client. This field of law constantly evolves because asset protection is a game of cat and mouse—people trying to preserve wealth develop new strategies and people trying to take wealth develop new ways to get around those strategies. Moreover, some clients face greater levels of risk than others. If your attorney is not on the cutting edge of asset protection strategies, you are less safe than you could be. Call my office to schedule a free, no-obligation consultation to see how we can work to preserve your wealth.