Wealth Building Lessons

According to Mark Nestman, Wealth Preservation & Tax Consultant and President of The Nestmann Group, there are 50,000 new lawsuits filed everyday in the US. The odds of every US resident being sued is 100% every 16.5 years!!! A study published in March, 2007, entitled “Jackpot Justice,” estimates that lawsuits cost the U.S. economy US$865 billion annually. This figure represents a yearly “lawsuit tax” of US$9,827 for a family of four. Pretty unbelievable!

The reason lawsuits (and especially frivolous lawsuits) are so common in the US is because an attorney can take a case on a contingency basis. He won’t charge you a dime for his services, only a percentage of the profits, winnings, earnings, money recovered from the defendant. So this means they’ll only go after rich defendants with the potential to payout.

Everybody’s heard of the the lady who sued MacDonalds because she was clumsy enough to spill coffee on herself and won millions, but have you heard the story of Mr. Jack Ass, who sued Viacom claiming that the MTV show Jackass plagiarized his name, infringed on the trademark and copyright to his name and defamed his good character!

Or the Washington, DC judge Roy Pearson, who sued a dry cleaners for $67 million over a pair of lost pants. I guess everyone needs to be compensated to the tune of 84,115 pairs for every pair lost. Of course, I’m not sure where he got his $800 pants from in the first place. Last I heard, judges made less than garbagemen in New York!

Here are Mark’s top recommendations for avoiding frivolous lawsuits:

1. Keep your mouth shut, especially among people you don’t get along with.

2. Never make promises you can’t keep.

3. Avoid people you don’t get along with, remembering rules #1 and #2 while you’re doing so.

The most important element of this game plan is to make yourself look like an unattractive lawsuit target. Here are a few ideas:

4. Avoid having too much equity in your home, unless you live in a state with an unlimited homestead exemption, or if the equity in your home doesn’t exceed whatever homestead limit is in effect. Property owned in your own name is a sitting duck if you loose a lawsuit!

5. Use offshore business entities — especially limited liability companies — to hold title to business assets, brokerage accounts, etc. LLCs aren’t asset protection panaceas, but are far more resilient against lawsuits than holdings in your own name.

6. Keep a prudent amount of money offshore, in countries like Switzerland and Liechtenstein that are unfriendly to frivolous litigation. Contracts such as life insurance, annuities and asset protection trusts are particularly well protected.

I think these 6 points may be a bit too extreme for most people, but they’re valid nonetheless. I think for most people, having a good idea to have a good umbrella policy should be the first step.

Another technique I heard about from an attorney/real estate investor was called an Equity Stripping Trust Deed. You basically set up a corporation (with the disclosed officers being your relatives with different last names, or better yet, your attorney) and the corporation places a trust deed on your properties. This way it looks like you don’t have any equity. It’s essentially a deterrent against lawsuits. Lawyers are less likely to take on a case on a contingency basis if it looks like you’re over-leveraged and upside down on your investments.

Even with these precautions, you may not be immune from attacks by the “Jack Ass’s” of the world but you will have come a long way.

Recommended Products:
1. Asset Protection Strategies (with CD)

2. Asset Protection Strategies: How to Protect Your Assets Now and In the Future

3. Wealth Protection : Build and Preserve Your Financial Fortress

Bookmark / Email This