Asset Protection Society

Protecting Your Net Worth

Home Transition from thoughts to actions

I hope your New Year was pleasant and healthy and that you had time to reflect and gain perspective on what is a priority in your life. Today’s discussion is grounded in promoting action instead of merely getting you to think.

When deciding when is the right time to take action to protect your assets (or that of your clients), the following comments are something worth thinking about.

Why is it we all wait until the last minute; why is that we put important life decisions off until we really need too? There is a perfectly logical explanation as presented by Sir Isaac Newton (1642-1747). Everybody continues in a state of rest, or in uniform motion, until compelled to change that state by forces imposed upon it (Newton’s First Law).

In reality, the result is not the difficult part to achieve, it is initiating the change that is difficult to achieve. What then stimulates us to make this change? We know for certain that “threat” is an absolute stimulation, and we face these calls daily, but for many their action to protect their assets is simply too late and falls into a fraudulent conveyance.

As we also learned from Sir Isaac Newton, not all forces are equal. However, the force applied is equal and in the same direction of acceleration in physics and in debtor-creditor law. Once a person has a pending suit, their want to protect their assets is “swift and eager.” These external threats (initiated by an outside party or event) definitely heighten the emotion surrounding the decision-making. Here are some current examples and situations of “external” threats.

  • In civil actions in the US, it is possible that one in six jury awards will be over $1 million dollars.
  • One in every four Americans will likely become a target in a lawsuit this year.
  • Almost every American will have to defend themselves in some type of civil action in their lifetime.
  • One in five suits will completely decimate the underlying assets. According to Lawyer Weekly, the total amount of jury awards in 1999 was three times higher than in 1998 and twelve times higher than in 1997. Stabilization depends on each state as they pass or deny the rights for and against Tort Reform, issue-by-issue, damage by damage. Several states have abolished the right to appeal any caps on damages and ruled Tort Reform as unconstitutional.
  • Many judgments are reduced on appeal, but in many states, the appellant is required to produce a bond of 150 percent of the judgment.
  • Tort lawyers routinely go jurisdiction shopping; looking for places that award judgments in their favor.
  • Close to 19,000 medical malpractice payment reports were made in the US in 2006 according to the Annual Report, National Practitioner Data Bank.
  • It is estimated that about 25 percent of all the doctors in the US are sued on an annual basis. This means that if you have doctors as clients, especially if they are surgeons, they have a one in four chance of being hit with a lawsuit each year.  These are clients that need your help.
  • The National Practitioner Data Bank reported that there were 1,530 medical malpractice reports filed with them regarding resident or intern physicians in the US between 1990-2004 (NPDB Summary Report, National Practitioner Data Bank).
  • Thirty-three percent of all malpractice trials were against non-surgeons (Bureau of Justice Statistics).
  • Tort lawyers routinely look people up to see if the defendant is worth suing; looking for real estate, cars, credit reports, bank accounts and portfolios. Advertisements for cases have been a recent addition to print and television (about twenty years in the making).
  • Over the past 5 years more than 7 percent of all US Companies, both large and small suffered lawsuits costing them individually more than $5 million.
  • Contingency fees to attorneys are generally 30 – 40 percent of total awards.
  • The EEOC reports in ten years lawsuits have increased 32 percent from 1996 – 2006.
  • Trial lawyers not including judgments earned a purported $40 billion payday from Tort Litigation.
  • According to the USPTO (United States Patent and Trademark Office) 98 percent of all patent litigation claims were valid. Eighty percent settle out of court for an average award of $5 million.
  • The IRS claims that 70 percent of all small business owners do their taxes wrong.
  • Joint and Several Liability allows a plaintiff to recover from multiple defendants; in a state that follows the rule of Joint and Several Liability, a plaintiff that sues three defendants of which two are 95 percent liable, but are also bankrupt, the plaintiff is entitled to recover 100 percent from the third defendant who was found 5 percent liable. (Alabama, Delaware, DC, Indiana, Kansas, Kentucky, Maine, Maryland,Nevada, North Carolina, Pennsylvania, Rhode Island, Tennessee, Virginia denote states where there is NO protection from Joint and Several Liability). In other states, there may be caps or limited exposure (American Tort Reform Alliance 2007).
  • Twenty states in the US have no limits or caps on punitive damages (ATRA 2007). Punitive damages are money awards to punish the defendant.
  • Sixteen states have initiated Prejudgment Laws, meaning that interest is due to the plaintiff (if they succeed) from the time the suit is filed, until the time the suit is fulfilled, usually prime interest plus 2-3 percent (ATRA 2007).

Any one of these situations would prompt someone to want to protect their assets. In these cases, there are “third parties” who want to be the “takers”. These scenarios are imminent and scary! These are the situations where a third party is looming to reach out and take what is yours (rightfully or wrongfully), but the scary thing is that you have no control. The best-case scenario is a potential out of court settlement if you put a rocky road in front of the plaintiff. If the door is open, creditors will walk in and take all; it happens everyday to naïve, unaware and negligent defendants.

Occasionally, I get a phone call from someone, usually a young person, who says, “I’ve started this venture (or business) and along with my every effort to be successful, I want to protect what I am building” and “I want to protect my home and pension for the next generation, what do I have to do?” Hallelujah! The internal light bulb does go off for some!

These people have felt some internal movement of awareness stimulating their intuitive inertia. Maybe it is their “hunch”, maybe it is their awareness and education, but they understand the changes in society and truly feel the “shifts.”

Change is not easy by any means. I think that Robert F. Kennedy (1925-1968) summed up “change” accurately. Great change dominates the world everyday; either we change with it, or become its’ victim. In idealism, a wise person believes that “all that survives is change” and “only the strong only survive through change.”

I believe that this is the right time of the year and the right time in history for all people to initiate Asset Protection Plans.

What are you doing to protect your own assets?

What are you doing to help your clients protect their assets?

Now is the time to act and be proactive when it comes to protecting your wealth and that of your clients..

Until next time,

John Dietz

Co-Founder; The Asset Protection Society

Senior Advisor; Global Advisors