We regularly confer with successful families and business owners, and it’s amazing how important asset protection—protecting wealth from loss from lawsuit, liability, divorce, and other attack—has become to them. This is really on the radar, and should be. Unfortunately, if asset protection is even done at all, the planning is usually not very effective. Here are common errors we see nearly every week, and thoughts on how to correct them.
1. Using the spouse as the asset protection “plan.” We see this a lot, particularly with doctors concerned about malpractice exposure. While this does offer some protection, it ignores the risk of losing the assets if the “safe” spouse dies first or is themselves sued for some reason—like getting in a car wreck. The “technique” also introduces both perceived and real asset control issues that may prove unpalatable—like if loving spouse refuse to write a check out of the “protected” account, or argues in divorce proceedings that the assets transferred were a bona fide gift, and hence no longer marital property.
2. Overreliance on tenancy by entirety Florida is nearly unique in allowing spouses (only) to jointly title assets as “tenants by the entirety.” While hugely better than the common “joint tenants with right of survivorship” —because “T-by-E” assets can’t be taken if a judgment is rendered against one spouse—it offers little protection if both spouses are successfully sued, like when husband hits someone while driving wife’s car: husband is liable as operator, and wife as owner. Plus, if the safe spouse dies, the crapshoot begins.
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