Often, a high-risk professional will title all assets in the name of their non-professional spouse as an asset protection plan. The professional thinks they are a lawsuit target, but in the event they are sued, they could tell their adversary that they “have nothing in my name.” It’s a simple plan, but it sometimes backfiresHere’s an example where putting everything in the name of low risk spouse did not work out. A woman physician worked in a high-risk specialty. Her husband worked for a large company in a non-professional job. The couple bought investment real estate and titled all parcels in the husband’s name alone. Their bank accounts were in the husbands name, as were some non-retirement stock accounts. You can probably guess what happened.
The husband called me for asset protection advice because he had been at fault in a serious car accident. He had only $20,000 liability insurance. All of the assets titled in his name, and bought mostly with his wife’s earnings, were at risk. Fortunately, the car he was driving was also in his name only so his wife would not be liable for the car accident. What did they do wrong?
This couple made two mistakes. First, they should have titled their investment assets as tenants by entireties rather than in the husband’s name alone. Assets titled in the entireties would be exempt from the husband’s car accident liability as well as from the wife’s professional liability. Entireties protects against any judgment against just one spouse. If each spouse has a judgment from a different lawsuit and for a different reason the entireties protection works against all the judgments.
The second mistake is lack of adequate insurance. In Florida, both the driver and all car owners are responsible for car accidents. If one spouse is driving a car owned jointly or in the name of the other spouse both spouses are held liable for the full amount of damages. If you have significant assets in the family you must get a large umbrella insurance policy to cover automobile and homeowner liability.
You may think you know whom in the family is going to be sued and for what reason- such as, the dreaded professional malpractice liability. Sometimes its what you don’t expect that gets you. Both spouses and all assets must be protected in a property asset protection plan.