Question for life gurus

Jun 28, 2007

  1. Crabcake Johnny
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    Crabcake Johnny Guru

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    I have a buddy who owns a business and is asking me and lawsuit protection with permanent life insurance. Apparently he's having a scare since a fellow friend of his is currently in litigation.

    His agent is telling him that life insurance cannot be attached in a court judgement or be forced to be cashed out during a BK proceeding and is also not counted as an asset. He is looking for a place to park money, doesn't really care about the interest but just wants it to be "lawsuit proof" as a safety net.

    Is this true?
     
  2. slushhhpuppie
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    slushhhpuppie Super Genius

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    Some states protect life insurance policies and cash surrender values from lawsuits.

    To simply take assets off the table in the event of a lawsuit, just put them in an irrevocable trust.

    In any event, always consult an attorney.
     
    Last edited: Jun 28, 2007
  3. James
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    James Guru

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    Yes and No, most Attorneys will not sue if they can not easily find the money to be attached in a lawsuit. Yet if a Suit is filed there is a unknown factor, that is the Judge. While yes in general CV within a Insurance Policy is protected but a Judge with a wild hair up their butt can pretty much do what they want! Then its a race to the next higher Court, yet the Cash Value can be attached depending upon when the money was placed inside the Insurance Product (such as a suit is filed, then you stick a bunch of money inside of the WL or UL, that pig aint flying with no Judge!). The Five Way by Bert Meisel specifically uses the Bankruptcy rules of Insurance Products as one of the five ways you are gonna leave your business, and yes generally speaking cash value is a protected vehicle, but one that can be busted if mistakes are made. I would advice the client talk to a Attorney for specifics if that is one of the major concerns.
     
    James, Jun 28, 2007
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  4. Crabcake Johnny
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    Crabcake Johnny Guru

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    I guess if you really don't care at all about the interest and your only concern is pure protection then simply stash cash away in the safety deposit box. If some judge wants to know where withdrawals of thousands of dollars went say you went to Vegas and blew it on gambling.
     
  5. James
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    James Guru

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    I suppose but I don't get your point? I don't think any Judge is going to fall for that line. Sooner or later you are gonna want to access that money and if caught you gonna loose it and maybe even face criminal charges if the Judge caught you lieing to him.
     
    James, Jun 28, 2007
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  6. bluemarlin08
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    bluemarlin08 Guru

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    To simply take assets off the table in the event of a lawsuit, just put them in an irrevocable trust.

    That would be fine if it were done prior to any act that one might be sued and if you don't want access to the assets.
    What type of business is your friend in that he is so worried about being sued? Liability policies are very cheap.
     
  7. James
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    James Guru

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    That helps but in many cases they'll attack you personally since many small business or self employed don't have that many assets in their business and that their Liability Ins will max out at a certain limit, and even a LLC or any Corporation can nowadays be easy to by pass by the Courts and Attorneys.

    I also believe that most Qualified Retirement Accounts have protection from such suits, it is a question of how much money you want to protect. If it Retirement funds and personal money I would highly suggest WL to be included, but it has to be set up well in advance and no, no judge is gonna allow unlimited amounts go unnotice, IMHO.
     
    James, Jun 28, 2007
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  8. somarco
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    somarco That Medicare Expert Guy

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    Won't work.

    There is a legal term for that. Look up fraudulent conversion.

    A good attorney will find those assets and get them.
     
    somarco, Jun 28, 2007
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  9. James
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    James Guru

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    Protection from Suits and Trial Lawyers have to be planned for, you are absolutely correct, no Judge will allow "after the fact money" to come off the table. Plus there are obvious limits that any Judge will allow, now that limit I'm sure changes from Judge to Judge. If this is a major concern by a client, possible risk of future Law Suits (lets assume they are menace suits) one should seek out a qualified Attorney to advise on these matters.
     
    James, Jun 28, 2007
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  10. Crabcake Johnny
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    Crabcake Johnny Guru

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    I wasn't talking about a place to put money after a suit has been filed. I'm talking about a place to put "lawsuit proof" money now just in case you're sued down the road.
     
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