I have a buddy who owns a business and is asking me and lawsuit protection with permanent life insurance. Apparently he's having a scare since a fellow friend of his is currently in litigation.
His agent is telling him that life insurance cannot be attached in a court judgement or be forced to be cashed out during a BK proceeding and is also not counted as an asset. He is looking for a place to park money, doesn't really care about the interest but just wants it to be "lawsuit proof" as a safety net.
Is this true?
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I have a buddy who owns a business and is asking me and lawsuit protection with permanent life insurance. Apparently he's having a scare since a fellow friend of his is currently in litigation.
His agent is telling him that life insurance cannot be attached in a court judgement or be forced to be cashed out during a BK proceeding and is also not counted as an asset. He is looking for a place to park money, doesn't really care about the interest but just wants it to be "lawsuit proof" as a safety net.
Is this true?
Yes and No, most Attorneys will not sue if they can not easily find the money to be attached in a lawsuit. Yet if a Suit is filed there is a unknown factor, that is the Judge. While yes in general CV within a Insurance Policy is protected but a Judge with a wild hair up their butt can pretty much do what they want! Then its a race to the next higher Court, yet the Cash Value can be attached depending upon when the money was placed inside the Insurance Product (such as a suit is filed, then you stick a bunch of money inside of the WL or UL, that pig aint flying with no Judge!). The Five Way by Bert Meisel specifically uses the Bankruptcy rules of Insurance Products as one of the five ways you are gonna leave your business, and yes generally speaking cash value is a protected vehicle, but one that can be busted if mistakes are made. I would advice the client talk to a Attorney for specifics if that is one of the major concerns.
I guess if you really don't care at all about the interest and your only concern is pure protection then simply stash cash away in the safety deposit box. If some judge wants to know where withdrawals of thousands of dollars went say you went to Vegas and blew it on gambling.
I guess if you really don't care at all about the interest and your only concern is pure protection then simply stash cash away in the safety deposit box. If some judge wants to know where withdrawals of thousands of dollars went say you went to Vegas and blew it on gambling.
I suppose but I don't get your point? I don't think any Judge is going to fall for that line. Sooner or later you are gonna want to access that money and if caught you gonna loose it and maybe even face criminal charges if the Judge caught you lieing to him.
To simply take assets off the table in the event of a lawsuit, just put them in an irrevocable trust.
That would be fine if it were done prior to any act that one might be sued and if you don't want access to the assets.
What type of business is your friend in that he is so worried about being sued? Liability policies are very cheap.
To simply take assets off the table in the event of a lawsuit, just put them in an irrevocable trust.
That would be fine if it were done prior to any act that one might be sued and if you don't want access to the assets.
What type of business is your friend in that he is so worried about being sued? Liability policies are very cheap.
That helps but in many cases they'll attack you personally since many small business or self employed don't have that many assets in their business and that their Liability Ins will max out at a certain limit, and even a LLC or any Corporation can nowadays be easy to by pass by the Courts and Attorneys.
I also believe that most Qualified Retirement Accounts have protection from such suits, it is a question of how much money you want to protect. If it Retirement funds and personal money I would highly suggest WL to be included, but it has to be set up well in advance and no, no judge is gonna allow unlimited amounts go unnotice, IMHO.
There is a legal term for that. Look up fraudulent conversion.
A good attorney will find those assets and get them.
Protection from Suits and Trial Lawyers have to be planned for, you are absolutely correct, no Judge will allow "after the fact money" to come off the table. Plus there are obvious limits that any Judge will allow, now that limit I'm sure changes from Judge to Judge. If this is a major concern by a client, possible risk of future Law Suits (lets assume they are menace suits) one should seek out a qualified Attorney to advise on these matters.
I wasn't talking about a place to put money after a suit has been filed. I'm talking about a place to put "lawsuit proof" money now just in case you're sued down the road.
Remember O.J.s pension $? The Goldmans can't get to it. I believe there are some places that the money can be placed and I'm pretty sure it's qualified retirement plans. In fact, I think IRAs are now protected, but don't quote me on that.
I think you should have him consult with a lawyer. If the lawyer says he can shield his assets in a permanent life policy, then good for you and him. If not, can he still use the insurance?
I wasn't talking about a place to put money after a suit has been filed. I'm talking about a place to put "lawsuit proof" money now just in case you're sued down the road.
Once again, generally speaking WL and UL's are protected along with Annuities and Qualified Retirement Accounts. Yet given circumstances beyond our control all things are in flux. If down the road Insurance looses its tax deferred status IMHO it will also loose any protection it now holds. Best thing is to set up a plan and then have him and yourself go to an Attorney of some note in the field of business and trial law to have him give it thumbs up or down.
Annuities, annuities, annuities. This is one of the biggest benefits of annuities, that most people blow right by. There are drawbacks, but OJ Simpson is STILL searching golf courses based on the money he gets paid from annuities, that couldn't be touched.
Life policies might work, if you can keep inside of TAMRA guidelines, and need the life insurance, can qualify, etc. If you are young enough, and trying to stash a few 100K for a rainy day, you might have a problem with doing it in a life policy. If you get rated, it could be expensive.
Lots of things to look at. A GOOD estate planning attorney is the best route for this.
There is a legal term for that. Look up fraudulent conversion.
A good attorney will find those assets and get them.
Actually it is Fraudulent Conveyance. If there is any current potential claim or liability to another and he transfers the asset it is a fraudulent conveyance and a judge can break it apart and award it to a creditor.
Proper asset protection should not use offshore vehicles as they will not protect you from a judge telling you to repatriate the funds under judgement and when you do not comply you can be put in jail for contempt of court. This has happened before in a landmark case.
Numerous planning tools can be used like LLCs and FLPs which require a creditor to get a charging orders. Once a charging order is issued the creditor must wait for a distribution. If you do not do a distribution he cannot collect. This puts the debtor in a better postion to settle the claim for a lessor amount.
Only Irrevocable trusts offer any creditor protection, but the problem is those types of trusts must be for the benefit of someone else, not you.....and the are Irrevocable and must be formed before there are any potential claims or actions.
Debt can be used in a way called Equity Stripping, which is simply to encumber your assets with debt. No creditor wants your house and a fat mortgage with it.
Funds need to be in insurance products like policies and annuities or qualified plans covered by Erisa. IRAs are not covered under Erisa. Erisa is creditor proof by law.
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