Failed Asset Protection: A Case Study Provided by Legally Mine | Think Realty | A Real Estate of Mind
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Failed Asset Protection: A Case Study Provided by Legally Mine

“You have two options available to you when it comes to lawsuits: forget them and hope the snake never strikes, or legally chop the snake’s head off before it strikes,” said Steve Broadley, of Legally Mine asset protection services. During his training session at the 2017 Think Realty National Conference & Expo in Baltimore, Maryland, on June 24, Broadley dealt with the often-overlooked need for asset protection on the part of real estate investors and private lenders and revealed how the wrong asset protection plan can make a very bad situation worse, even, than no asset protection at all.

“Lawsuits Can Happen to Anyone”

After addressing the logistics of establishing asset protection for investors, business owners, and entrepreneurs, Broadley revealed some shocking details about failing to adequately and appropriately defend your assets from potential lawsuits. “It can happen to anyone,” he warned, noting that at their heart, lawsuits are not about tragedy, but about money. “If you have no assets and no money, you will never get sued,” Broadley noted, suggesting to laughter that audience members consider giving away all their money and selling all their assets to accomplish this goal. Not surprisingly, his audience demurred, opting to learn more about effective asset protection rather than surrendering their hard-earned investment capital.

Broadley went on to discuss the details of the case of “Dr. Adams,” a small-town physician who attended one of Legally Mine’s educational seminars, albeit a bit too late. “Dr. Adams had been a doctor for 25 years and had never been sued. He had fantastic relationships with his patients and was only a few years away from retirement. One day, he sent his secretary out for sandwiches for the office. She ran a red light and killed two teenaged sisters. That was the first tragedy, and it was a big one,” Broadley said. He went on to explain that the family of the deceased girls followed fairly standard procedure and was swiftly awarded a $1-million insurance payout from the secretary’s insurance policy. “However, then the lawyer did what lawyers get paid to do: started looking around for more money,” he said.

Dr. Adams had his practice set up as a C-corporation, which probably would have done a reasonably good job of protecting his assets a few decades ago when he set it up. However, said Broadley, “Laws are changing all the time, and when they change, who do they benefit? You, or the lawyers?” The family sued Dr. Adams for about $3 million and, after about four weeks in court, the doctor lost and the family was awarded $30 million. “His life was wrecked,” said Broadley. “He lost his practice, his equipment, and his building. He also lost his family home, his rental assets, and everything he had in his name. Then, they garnished his wages. It was relentless. All because he sent his secretary for sandwiches. Did he do anything morally or ethically wrong? No. But the lawsuit was filed anyway.”

Asset Protection is Time-Sensitive

As Broadley observed, lawsuits are, at the heart, all about money. “If Dr. Adams had owned no assets, the insurance money would have sufficed,” he said. Investors, who are, by the nature of their investments, often more open than most to liability lawsuits even more compelling than Dr. Adams’, must be diligent when setting up corporations and making purchases related to their businesses in order to protect their assets so that they do not appear accessible to litigious individuals. Broadley recommended working directly with an asset protection specialist to make sure that your asset protection strategy is up to date and as effective as possible.

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