People are probably of the belief they won't be sued. Some unscrupulous people use asset protection tactics to hide from creditors or to try to duck the Internal Revenue Service. But there are many more legitimate uses, says New York attorney Gideon Rothschild, chairman of the Bar Association's committee on asset protection. People should know there are legitimate steps they can take at the right time to protect themselves. If a judge thinks you set up a trust or put property in your spouse's name to avoid paying a debt, you could be in trouble.
Insurance usually is the first line of defense from a lawsuit, experts say.
Standard homeowner's and professional malpractice policies cover general liability and provide a lawyer to defend you when someone falls on your property or claims you were negligent in your profession. No creditor can get at money that's due you under an employer-provided pension plan. That's protected by federal law. Beyond that, rules on what a creditor can force you to give up to pay a debt or a judgment vary from state to state. If you think you might be sued, put assets in the name of a spouse or family member who is at lower risk of lawsuits.