Oftentimes, when people are considering whether to file a lawsuit, they must consider what the possible financial compensation could be if they are successful. Winning a judgment and collecting on a judgment are two entirely different things. One can prevail in a lawsuit and wait years to see only a fraction of the judgment amount if they see anything at all. This scenario may make some people think twice about whether to pursue a matter in the legal arena. Going through a trial is a difficult thing that people may not want to experience if they do not end up with any compensation. Thus, the more that your assets are protected, the more you may be able to forestall the possibility that you will be sued.
In order to fully understand why someone may be hesitant to file a lawsuit against you if you have sound asset protection, it is important to understand what happens after a lawsuit is concluded. Assuming that there is a judgment against you and you end up owing money, this is just the start of the process. The judgment must be registered in order to begin the process of collection. Then, you must begin to locate the defendant’s assets. This is not always the easiest thing to do, especially if there is a structure of interlocking LLCs that hold the assets. It is even more difficult when assets are not domiciled in the United States since foreign jurisdictions provide an extreme amount of privacy when assets are moved there.
Collecting on a judgment cannot be done haphazardly and must be done with forethought and pursuant to a plan. However, when one is planning how to collect a judgment, they cannot collect what they cannot locate. Even if the judgment holder knows about the assets, they can only collect assets that are either in your name or that you control. While plaintiffs may not know the exact nature of the assets you hold and where you keep this property, they should have a sense ahead of time as to the general contours of your asset structure. Before embarking on the process of litigation, they will have to do their due diligence to know more about who they are suing. They may even search publicly available databases to figure out which property is owned by the likely defendant.
Similarly, plaintiffs will need to find a lawyer who will take their case. Most attorneys will take cases on a contingency basis, meaning they are only paid out of the money that is collected from the defendant. If their client does not get paid, they do not get paid either. Thus, many lawyers are making the calculation of what their potential payoff is before they take the case. If the lawyer does not think that there will be a financial windfall, or even a payment in it for them, they may hesitate to take the case. In this case, an attorney will only take home a paycheck based on the money that they recover.
While some plaintiffs may file a case on principle and view a judgment as vindication and validation, most other plaintiffs go through court in order to be compensated for whatever harm they claim to have suffered. History is replete with examples of large judgments against defendants that have gone uncollected. For example, the O.J. Simpson murder case was one of the most famous jury cases of all time. After Simpson was acquitted of the murder charges, the families of the deceased brought a civil case against Simpson and obtained a $33 million judgment. However, over 20 years after the civil case, an overwhelming amount of the verdict has gone uncollected. Certainly, Simpson is not destitute, but the plaintiffs have not found the assets to collect.
Now, contemplate what the experience is like for a plaintiff searching for assets. A check of the public records database comes up empty and does not reveal much of anything by way of property. They may learn that you have a home, perhaps even a nice home. However, the laws of the state will likely have a homestead exemption, meaning that the plaintiff cannot touch your primary residence, even if they have a large judgment against you. Even if they are able to learn that you have a trust established, they may see that it is either in a state that allows domestic asset protection trusts or it is established in a foreign jurisdiction. For many plaintiffs, when they see that a trust is domiciled in Nevis or the Cook Islands Trust” rel=”noopener” target=”_blank”>Cook Islands, they realize that there is little chance to collect those assets unless they can somehow persuade the judge to order the defendant to repatriate the trust under the threat of contempt. That happens on a few occasions, but it is exceedingly rare. At some point, the plaintiff may realize that their chances of a windfall in a lawsuit are very slim and they may choose not to engage in the process.
The most important thing to remember is that all of this must be done before there is any type of litigation filed that threatens you. You must establish asset protection strategies when there is the prospect of litigation as opposed to actual litigation. Otherwise, you may have been found to have engaged in a fraudulent conveyance and your assets will still be vulnerable in a lawsuit because the court will disallow the transfer. An asset protection attorney can help you create structures that can your assets difficult to find and reach. Mile High Estate Planning are experienced asset protection attorneys with years of experience in working with individuals of various net worths to achieve the maximum degree of protection possible. While they cannot guarantee you that no lawsuit will be filed against you, an effective asset protection assets will help preserve your assets in the event that someone attempts to file a lawsuit against you.