The Need for Protection One idiot strapped a refrigerator on his back and ran in a race. The strap broke and he hurt his back. He sued the strap manufacturer and collected $1.3 million. It is impossible to buy a skateboard anywhere these days. The manufacturers can't get liability insurance. (So the kids make more dangerous home-built ones instead.) Once there is a judgment against somebody, the court swears them in and takes their testimony "in aid of collection." They have to tell the court everything -- no matter how unjust the case against them is. What properties they own, what savings accounts, what checking accounts, and what money market funds, and how much is in each one. What stocks they own, what bonds they own, where each and every safe deposit box is and what precisely they have in each. As a judgment debtor a person has no rights, as the winner now owns everything. If one were a rapist or murderer, they'd have more rights, such as a right to silence. And heaven help the defendant if he fudges on his testimony. If he conceals a safe deposit box, or that stash of gold coins he buried ten years ago in the garden, he's committing perjury, a felony. With mandatory sentencing guidelines in effect in most jurisdictions, he will go to prison for the amount of time specified in the statute -- the judge no longer has the discretion to set the sentence but must sentence in accordance with the guidelines created by the legislature for that crime. The popular belief that people receive probation for a first offense is no longer the case in many jurisdictions, including the federal court system. The perjury defendant may even spend more time in prison than the thug who broke into his house and slipped on his child's marbles. While the defendant's lying about his assets will always be the felony of perjury, if the thug walked into the house in daylight through an unlocked door, his crime is likely to be the misdemeanor of trespass, with a maximum sentence of six months, versus the perjury felony with a maximum of from five to twenty years, depending upon the jurisdiction. It is all too easy to go around saying it won't happen, but once it happens, it is too late. If money is transferred after an incident or accident, that is concealing assets, which can cause both criminal charges and civil loss of other assets. The law looks at it as stealing the property of the person who is suing, or who may sue. The defendant may think it is his lifetime savings from hard work, but legally he now holds it in trust for the person who has a pending claim. Presumed knowledge of the possibility of a claim is sufficient to invoke these fraudulent transfer laws. So if somebody moves their money the morning after an auto accident, it is likely to come back to haunt them. The only legally valid protection is to take careful and legal protective steps before there is even a potential claim against a person or his assets. While these concerns about protecting assets apply mostly to American readers, non-American readers need to consider the dangers of keeping bank accounts or other assets in America while this craze rages on. It also raises serious concerns about the viability of investments in American businesses that might be affected by such judgments. Inadequate insurance A doctor works all his life to provide competent and effective care for his patients. A surgery leaves a patient crippled. No surgeon is 100% successful, but the jury in the malpractice suit awards the plaintiff $15,000,000, an amount greater than the policy limits. Or worse, the insurance company fails and there is no protection for the doctor. Partnerships A law firm is having its monthly partners meeting. They send out for lunch. Most want pizza but one wants a pastrami sandwich. Their secretary agrees to go pick it up. Unknown to the twelve partners, this person has a horrible driving record. On the way back, the secretary runs into a group of pedestrians. The police arrive. The secretary eats the pastrami and the partners are sued. A judge decides that they are liable as the secretary was performing an act for the partners in her ordinary course of employment. The jury, sympathetic to the victims and enraged by the driving record, awards $3,000,000 in damages. As partners, all of the lawyers are jointly and severally liable. In effect, the jury has awarded the plaintiffs three condos, two sail boats, three houses, nine cars, and twelve installment notes. Directorships It used to be an honor to be a director of a bank, savings and loan or prominent business concern. Today there are over 2,243 directors of banks and savings institutions being sued. One hospital failed and the IRS sued its community advisory board for unpaid back taxes. Simple Ownership A land speculator bought a parcel for subdivision, held it for one week and sold it to a developer. Later, after houses were built, a homeowner who was an environmental engineer noticed an old buried drum. It contained a deadly toxin. The Environmental Protection Agency held the site to be a "superfund" site. The largest law firm in the world, Uncle Sam, began an action against the landowners. The suit brought in the land speculator. Although the total invested was only $100,000, the inferred liability exceeded $30,000,000. Under the law this can never be discharged. The corporate builder and corporate developer collapsed leaving the individual land speculator to carry forever his modern scarlet letter. Joint Ownership Mom, with the best of intentions, deeded her house to joint ownership with her son. She intended to avoid probate, taxes, etc. Unfortunately, a tax shelter that he participated in resulted in an unfunded tax liability of $75,000. The son was a little down on his luck at the time of the tax levy. The IRS can seize and sell the house according to the United States Supreme Court. Inferred Liability A woman answers a knock at the door and lets the IRS agent into her house. the IRS agent gives her a bill for over $100,000 of back taxes, penalties, and interest with her ex-husband's name. Apparently he was a little creative with his filings, while she simply signed their joint return. Inadequate Corporation Almost everyone knows that you may use a corporation to shield liability from its shareholders. Unfortunately most people fail to follow all the rules about keeping the corporate papers and procedures up to standard. A good attorney has an excellent chance of penetrating the "corporate veil" and going directly to the officers', directors' and shareholders' pockets. Charitable Adventures It is a sad but true statement that the prudent person today should refrain from serving in any responsible capacity for a charitable organization. One of the largest items in the national Boy Scouts' annual budget are legal expenses. Two scoutmasters take a number of boys camping. Boys will be boys, and not all scoutmasters are always perfect. The scoutmaster who was not at the lake while his partner allowed rough play that led to a drowning may be held equally liable since he accepted responsibility for all of the children. Childhood Dreams You are so proud of your child. She has progressed well in school and has been responsible in all her habits. For a seventeen year old, she is remarkable. She does, however, like rock music. While returning from the grocery with your salad fixings her favorite new song is played on the radio. She turns up the volume on your expensive car stereo. Way up. She does not hear the siren of the rescue vehicle overtaking her to pass. The ensuing wreck leaves a trail of havoc that leads right into court. Your insurance company settles the first case for policy limits leaving you high and dry on the other cases. Being responsible for her until emancipated, you are left holding the bag for her accident judgments. How many other examples do you need? While the incidents cited above may seem exceptional, to those affected they meant financial ruin. This book gives you the background needed to begin the process of lawsuit and asset protection. It is not designed as a tool to help someone avoid paying his ordinary debts. But its techniques can be used as a defense against the extraordinary and unintended financial calamities that can occur too easily in our litigious world. Getting help in creating an asset protection plan The best way to do this is to seek the assistance of professionals, and there is now an asset protection firm that works with clients from all over the country. They can also work with your existing lawyers or accountants if you wish. For a free information package write: Asset Protection Corporation, Suite 201A, 14418 Old Mill Road, Upper Marlboro, Maryland 20772.