For most taxpayers, car accidents are likely your greatest potential source of legal liability. Whether caused by yourself, your spouse, or your child, car accidents can unleash a wave of lawsuits that, if left unchecked, can jeopardize everything you have financially built for yourself and family. There are plenty of easy and cheap asset protection steps you can take though to mitigate driving risks and protect everyone and everything you have from court collections.
1. Titling your car in driver’s name alone
The first, and easiest step, you can take to protecting your assets is titling every car in the particular driver’s name alone. If your spouse and children have their vehicles, make sure each one is in their names only. The lone exception here is children under age 18; you are still held liable for any actions he or she does while underage, including car accidents. Once your child reaches 18 though, be sure to either gift or sell the vehicle over, whatever it takes to put their name on the title alone.
This strategy also applies towards your spouse; if a husband or wife is driving their partner’s vehicle, instead of their own, and causes an accident with it, then a plaintiff could conceivably go after both partners’ assets, individually and jointly held. On the other hand, if an accident happens while driving a vehicle under the driver’s name alone, then only his or her individually owned assets are vulnerable. If you also have reliable umbrella liability coverage and correctly titled assets, then you should be well-protected financially. Car title transfer procedures can vary, so be sure to consult your local Department of Motor Vehicles office on how to conduct such transfers legally.
2. Umbrella liability insurance
Umbrella liability policies provide coverage levels above what individual automobile and homeowners policies can cover. For example, if a serious accident incurs over one million dollars worth of liability and your auto insurance policy only covers up to $500,000 then you would be personally liable to pay the remaining amount. An umbrella policy could come into play though and help cover the difference once your other insurance coverage is maxed out. For example, in the previous scenario, a million-dollar umbrella policy could cover the remaining $500,000 instead of you paying for it.
Umbrella policies are great to have if you live with children who drive. This type of coverage normally cost $300 a year or less per $1 million dollars. Despite the additional cost, these policies provide a catch-all that can be lifesaving in times of personal liability lawsuits.
3. Strategic asset titling
Nearly half of U.S. states provide married couples a joint ownership offer known as ‘tenants by the entirety’. If you and your spouse happen to live in one of these locations, you may want to utilize it for asset protection.
This ownership option provides fantastic asset protection capabilities. What this means liability-wise is if you cause a car accident while driving a vehicle titled in your name, a plaintiff cannot come after money in an account you and your spouse jointly own as tenants because said spouse owns all of the funds in it besides yourself. To pursue this option, a married couple just needs to go to their bank or brokerage firm and request their accounts titled in this manner.
Again, though, only approximately 50% of U.S. states offer this protection, so research first whether or not you live in one of them. Furthermore, laws regarding asset titling can vary widely, so looking into your state’s statutes is recommended as well. For example, in some states, ‘tenants by the entirety’ only covers real estate assets. If you do not live in a state that has this option in its statutes then sticking with a comprehensive umbrella policy is recommended instead.
Consider Your Asset Protection Options Today
No matter how careful you teach your children to drive or handle a vehicle yourself, the risk of car accidents always exists. Despite what you think is careful preparation, an accident can change your life and family’s life for good. Taking the proper steps to protect your assets beforehand will eliminate most opportunities plaintiffs have to claim them in light of a settlement against you. Let’s face it: asset protection is important to protecting yourself and your family’s future; that being said, feel free to contact us today for a free 30-minute strategy session with one of our expert advisors to discuss your options now.