No one is immune to lawsuits, and the number of cases against businesses and individuals continues to rise yearly. According to the American Bar Association, the average lawsuit cost is $54,000. If you’re not prepared, a case can wipe out your savings and leave you in debt. While you may not be able to prevent every possible lawsuit, you can take steps to protect your wealth and assets from being seized in a judgment.
Read on for some top tips on how to keep your money safe.
1. Review your insurance coverage.
Make sure you have adequate liability coverage if you’re sued for something that’s your fault. For example, homeowners should have at least $100,000 in liability coverage. This will cover the cost of any damage you’re found liable for, up to the policy limit.
You may also want to consider an umbrella policy, which provides additional protection above the limits of your regular insurance policies. You can usually get umbrella coverage for around $200-$300 per year. Depending on your assets and the laws in your state, this could be a wise investment.
2. Create a living trust.
If you have significant assets, you may want to consider setting up a living trust. This type of trust can help protect your property from creditors and lawsuits. The trustee manages the property in the trust, and you can name the trustee yourself. You can also ask someone else, such as a family member or close friend, to manage the trust if you become incapacitated.
When setting up a living trust, it’s essential to consult with an attorney to ensure it’s done correctly. They can also help you determine what type of trust is best for your situation. For example, there are revocable and irrevocable trusts. Revocable trusts can be changed anytime, while an irrevocable trust cannot.
3. Be careful with your investments.
Not only can you lose money through bad investments, but your investment portfolio can also be at risk if you’re sued. For example, if you invest in a company and it’s sued, the court may order your assets to be frozen until they resolve the case. It can tie up your money for years and prevent you from access to it.
To protect your investments, consider working with an expert investment management service. They can help you diversify your portfolio and choose investments that are less likely to be sued. You may also want to consider investing in a trust or LLC. This step can help protect your assets if the company you invest in is sued.
4. Keep good records.
If you’re sued, the first thing the other side will try to do is prove that you’re at fault. They will request your records, including financial records, emails, and text messages. If you don’t have good records, it will be easier for them to prove their case against you.
Start by creating a system for organizing your documents. This can be as simple as a filing system or an electronic database. Make sure it’s easy to access and update whatever method you use. You should also keep track of all communications, including emails, text messages, and phone calls. This will give you a record of what was said and when it was said.
Avoid shredding documents that you can use as evidence in a lawsuit. Even if you’re not required to keep them, it’s better to err on the side of caution. If you’re sued, you can turn over the documents to your attorney.
5. Protect your assets with a prenuptial agreement.
If you’re married, a prenuptial agreement can help protect your assets in the event of a divorce. This agreement outlines what property is considered separate and what will be divided in case of a divorce. It can help you keep your assets safe if you’re ever divorced.
A prenuptial agreement can also help protect your assets during your death. If you die without a will, the court of law will divide your assets as they see fit. This may not be what you want. A prenuptial agreement can help ensure that your assets are distributed the way you want. Talk to an attorney about drafting a prenuptial agreement.
6. Consider your business structure.
Finally, people can also sue businesses. If you own a business, consider the best structure for it. For example, an LLC can help protect your assets if the company is sued. There are other business structures, such as S corporations and C corporations. Each has its advantages and disadvantages.
It would be best if you also considered insurance for your business. This can help protect you from lawsuits. For example, general liability insurance can help pay for damages if your business is sued. Talk to your insurance agent about the best coverage for your business.
These are just a few tips to help you protect your wealth from lawsuits. For more information, talk to an attorney or financial advisor. They can help you create a plan that fits your unique situation. If you’re already being sued, speak to an attorney about your options. They can help you defend yourself and protect your assets.