OHIO ASSET PROTECTION PLANNING: FOUR WAYS TO PROTECT YOURSELF FROM LAWSUITS Posted on – 09/25/2017 by PJK It seems like nowadays anyone can sue anyone for any reason. This seems to be especially true for those individuals who work in high risk professions, such as being a doctor, lawyer, engineer or architect. The risk of being sued can be even greater for entrepreneurs and business owners, who have customers, employees, vendors, shareholders, and investors that can become disgruntled. The key to protecting yourself from lawsuits is to plan in advance. By putting a solid asset protection strategy in place before you receive a certified letter from the clerk of courts is the best way to protect your assets and possessions. In order to protect yourself from lawsuits and to be in the best position to reach an acceptable settlement, consider the following strategies. Review Your Insurance Coverage. Make sure that both you and your business have enough insurance, and the right kinds of coverage. Insurance is the first line of defense in the event of a lawsuit, and many times the insurance company is required to provide an attorney to defend you. When you are looking to protect yourself from a lawsuit, working with a high quality and knowledgeable agent should be your first step. In addition to basic coverage, you should inquire about an umbrella policy, professional liability coverage, employment practices coverage, and Directors’ and Officers’ coverage (D&O), just to name a few. Establish Multiple Business Entities. When you own everything in your individual name or under a single business entity a lawsuit can place your entire net worth at risk. To avoid this devastation, it may be advantageous to segregate certain high risk assets or activities from items that are less risky. Many savvy individuals hold their real estate, business, and equipment in separate LLCs to avoid one aspect of their business from putting the other aspects at risk. For example, many real estate investors title each property in a separate LLC to limit the possibility of a claim at one property resulting in exposure to their other properties. Trust Your Spouse. Property that is held jointly with your spouse is generally subject to the claims of either spouse’s creditors. On the other hand, property held in one spouse’s name is not generally subject to the claims of the other spouse’s creditors. However, there are some drawbacks to this approach, especially in the event your marriage goes south and the assets titled in your spouse name become disputed, or even worse you spouse sells or liquidates those assets without your knowledge in anticipation of a divorce or separation. Ohio Asset Protection Trust. In 2013 Ohio passed the Ohio Legacy Trust Act which authorized the creation of Ohio Asset Protection Trust. Under the terms of this law, an individual is permitted to transfer property to an irrevocable trust, thereby placing the transferred property out of the reach of certain creditors. After the transfer is made, the individual is still allowed to receive the benefits of the transferred property and still retain a certain amount of control over it as well. These types of so called “self-settled spendthrift trusts” are not permitted in every state, and were not permitted under Ohio law prior to 2013. Not all of these strategies are appropriate for everyone. However, taking advantage of one or two of these strategies can provide additional protection and additional piece of mind. Talk to a legal professional to find out which strategies might be right for you. Paul Kellogg is an attorney in Cincinnati with the Phillips Law Firm, Inc. Paul’s practice focuses on providing comprehensive estate planning and probate services to families and business owners, as well as serving as outside general counsel to entrepreneurs and businesses where he provides guidance and advice on a wide variety of transactions and disputes. He can be reached at (513) 985-2500 or via email at [email protected]
Please explore Paul’s other articles on estate planning and business on the Phillips Law Firm Blog page. The article is for educational and informational purposes only and does not constitute legal advice. Anyone contemplating taking legal action is urged to obtain proper legal advice from an attorney licensed in your particular jurisdiction. For an initial consultation contact us at (513) 985-2500 or email us at [email protected]
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