Dear Clients, Colleagues, and Friends,
Margery enjoys success in her business and has significant balances in her California bank. That is, until she gets sued. Because it is almost always cheaper to settle a tort case than to let it go to trial, Margery decided to go that route. Unfortunately, she had to settle for more than she would like because of the large amount of liquid assets that she has exposed.
Hoping to better protect herself from predatory lawsuits in the future, Margery seeks advice from her trusted advisors – including her Estate Planning Attorney. The attorney’s advice was to move as much of her liquid assets as possible into an asset protection trust domiciled in one of the 19 asset protection trust states and keep the trust’s funds in a Delaware bank or trust company.
For more than 150 years, the Delaware law prevents the attachment or garnishing of funds on deposit by banks, trust companies, savings institutions, or loan associations. The purpose of this law is to allow these types of accounts do what they are intended to do – grow. These types of institutions are managing investments, and allowing attachments on their deposits is not conducive to investment management.
Margery agrees that there is no practical reason to keep these assets in California, and if keeping in an asset protection trust on deposit with a Delaware bank or trust company, why wouldn’t she?
A year or so after establishing her new trust, Margery got hit by another lawsuit. Margery’s lawyers quickly pointed out to the suing party’s lawyer the difficulty it would have in collecting on the judgement even if they won the case. Litigation is very expensive, and plaintiffs are not likely to sue if there is doubt as to collectability. Margery was able to settle this case for a nuisance value sum and happy to do so.
Margery doesn’t understand why her lawyer didn’t tell her about the asset protection trust and the Delaware bank account before she was sued the first time, but she was sure glad she put the plan into place well before the second.
If you are looking to protect your legacy from predators with a belt and suspenders approach, consider an asset protection trust and a Delaware bank or trust company to hold the funds for greater peace of mind.