Not necessarily. While insurance can help limit your personal exposure, it does not provide absolute protection. Plaintiffs’ lawyers routinely claim damages above and beyond defendant’s insurance limits, and there are certain types of liabilities (such as personal guarantees) that will not be covered by your insurance policies.
At Romano & Sumner, we use a variety of asset protection tools, and we tailor each client’s strategy to his or her personal circumstances. No two asset protection strategies are exactly alike, and the tools we recommend for you will depend on a variety of factors relating to your business or profession, your risk profile, your accumulated wealth, and your estate plan. Generally speaking, however, the types of tools we use and recommend include:
- Limited liability companies (LLCs) established under Texas law and the laws of other states
- Domestic and foreign asset protection trusts
- Other legal entities and trust structures
- Overseas bank accounts and safety deposits
- Prenuptial and postnuptial agreements
- Qualified retirement plans under ERISA
- Umbrella, general liability, professional liability, and errors and omissions insurance
The list of reasons why business owners, professionals, and investors can (and do) get sued is almost endless. That said, some of the most common lawsuits and liabilities for high-net-worth individuals include:
- Business-related lawsuits alleging products liability, premises liability, and other claims
- Discrimination, harassment, and wrongful termination claims
- Creditors seeking to enforce a personal guaranty on a business loan
- Professional malpractice lawsuits
- A spouse claiming substantial property and financial support rights in a divorce
If I start using an asset protection strategy, will I still have access to my assets when I need them?
Generally speaking, yes. While some asset protection tools (such as certain types of irrevocable trusts) can limit the grantor’s access to his or her assets, other tools provide much greater flexibility. When developing your asset protection strategy, understanding what you may need for yourself and what you want to protect for future generations will help inform the specific types of protection tools we will use.
Yes, in Texas companies can hire employees “at will.” However, companies can also use employment agreements, and using an agreement is the best way to ensure that your company has the rights and protections it needs when it comes to terminating or resolving a dispute with an employee.
While you can pay a small fee to an “online service provider” to prepare Articles of Organization or Articles of Incorporation for you, this is generally not going to be the best idea. There is much more to forming a business than filling out a few simple online forms, and to maximize the benefits of forming an LLC or corporation you will need to discuss your specific circumstances with an experienced business attorney.
Probably. Even if you will be the sole owner of your company, there are still a variety of reasons to operate under a legal entity structure. Among the most important is limiting your personal liability. If you properly form and manage an LLC or corporation and your company gets sued, it will be your company’s assets – as opposed to your personal assets – that are at risk in the litigation.
A Sugar Land estate planning lawyer can answer your questions about establishing a legal will as well as other vital estate planning documents. Call to discuss all your estate planning questions and concerns with Romano & Sumner today.
Dying without a Will can make the probate process lengthy and expensive. Additionally, if you die without a Will, you are considered to have died “intestate” and the Texas intestacy laws of descent and distribution will dictate how your estate will be distributed to your heirs (your spouse, children, parents, siblings, etc.). Essentially, Texas law provides a default Will for you…but it is often not what you would have chosen yourself. This can be especially true if you have a blended family and children from outside of your current marriage.
To determine who your legal heirs are, an interested party (usually an heir) will need to petition the Court to determine who your legal heirs are. This process is commonly referred to as an “heirship proceeding.” If there is a need to administer your estate, such as to distribute your assets to the rightful heirs, pay your debts, etc., then an interested person will also need to petition the Court to be appointed as the personal representative of your estate. Once appointed, the personal representative will “step into your shoes” and manage your estate as required by Texas law. The heirship proceeding and appointment of a personal representative for an “intestate” estate involves appointment of a court appointed attorney and strict oversight by the probate court all of which increases costs and lengthens the time required to distribute the assets of the estate.
A revocable trust is an estate planning tool that allows you to retitle assets out of your individual name into the name of the trust. Used properly, a revocable trust allows your estate to avoid the probate process and provides seamless administration of your assets after you pass. A revocable trust can also work to allow for avoid the need for a guardianship proceeding for a minor or an incapacitated beneficiary.
If you become incapacitated and you do not have a Durable Power of Attorney and a Medical Power of Attorney in place it may become necessary for your loved ones to petition the court to appoint a guardian for you. The Guardianship process is very time consuming and expensive, and the person that is appointed as guardian may not be the person you would have chosen for yourself.
A Durable Power of Attorney is a document which allows you to name an “agent” to manage your financial assets should you become incapacitated and are unable to make financial decisions. A Durable Power of Attorney may last for a defined period of time or until you die.
A Directive to Physicians, often called a “living will,” is an advance healthcare directive that communicates your medical wishes to your family and attending physician should you become ill with a terminal or irreversible condition.
Medical decisions are often difficult to make, especially when a family member is forced to make decisions on your behalf and without your guidance. By preparing a living Will, you are not only making sure your wishes are clear, but you are ensuring that your named agent(s) have clear directions regarding maintaining or withdrawing life support in the event you are in a terminal or irreversible condition. This document is vital to prevent confusion and disagreements within your family during a medical crisis.
A properly drafted Will ensures that your assets pass according to your wishes after you die. Perhaps more importantly, a Will greatly simplifies the probate process for your family and can help make an otherwise difficult time easier to endure. Having a Will can also allow you to care for your loved ones even after you are gone.
I suspect that my trustee removed assets from the trust and improperly distributed them. Can I compel the return of these assets from a third party?
Maybe, maybe not. You cannot seek compensation from a third party who is an innocent purchaser of the assets. You can, however, sue the trustee for their value (the trustee may or may not have the financial ability to pay the judgment, however).
That depends on the terms of the trust. If the trust gives the trustee absolute discretion, there is probably nothing you can do unless you find grounds to remove the trustee. If the trust instrument sets out rules for distributions, however, the trustee must follow these rules.
No, not by itself. If the trust instrument includes an investment standard, however, the trustee must comply with it. Otherwise, the trustee is held to the “prudent investor” standard. A mere decline in the value of trust assets might not be enough to prove that the trustee acted imprudently.
If you request information more often than once a year, the trustee is still obligated to provide this information to you as long as your request is reasonable. If he doesn’t, you can file a lawsuit to compel him to provide this information. Additionally, the terms of the trust may require that information be distributed more than once a year.
A trustee must:
- comply with the terms of the trust instrument,
- put trust assets to productive use (typically through investment),
- manage trust assets with the prudence, intelligence and judgment that an ordinary person would use in managing his own assets (the “prudent investor” standard),
- avoid conflicts of interest,
- refrain from borrowing trust assets,
- refrain from favoring one beneficiary over another, and
- provide beneficiaries with an accounting statement at least once a year.
Under the Texas Trust Code, the trustee is obligated to provide trust beneficiaries with an annual accounting statement that includes:
- distributions to beneficiaries,
- all other trust transactions, and
- details of the bank into which trust cash is deposited.
Yes, under certain circumstances. You can examine the trust document to see if it includes any conditions under which the trustee can be replaced. If it doesn’t, then you will need to prove some sort of misconduct on the part of the trustee and petition the court for a replacement.
The most common grounds for contesting a will are:
- Lack of testamentary capacity
- Undue influence
- Lack of testamentary intent (the testator did not intend the document to operate as a will)
- Lack of proper formalities (signatures of witnesses, for example)
Can an estate executor or administrator recover attorney’s fees he has spent on behalf of the estate?
Yes. Under the Texas Estates Code, an executor or administrator can recover amounts that he has spent on behalf of the estate, as long as they are “reasonable and necessary.” These amounts include but are not limited to attorney’s fees. The money comes out of estate assets.
Undue influence occurs when the testator, at the time of the execution of his will, is subject to an influence (usually a person) that overpowers or subverts his mind to the extent that the will would not have been executed without that influence. Undue influence can be used to invalidate a will.
The testator of a will has “testamentary capacity” when he possesses the mental capacity to understand:
- that she is creating a will,
- the effect of making a will (the disposition of her property after she dies),
- the “nature and extent” of her property,
- the identity of her next of kin and other “natural objects of her bounty”.
Her mind must also be able to form reasonable judgments.
A holographic will is a will written completely in the handwriting of the testator (the person whose property is being distributed) and signed by the testator. Holographic wills are excused from the formalities associated with attested wills, such as the requirement that a will be signed by witnesses.
To contest a will, you must be an “interested person” – a person who stands to gain or lose from the way the deceased person’s estate is distributed. An interested person might be an heir, devisee, spouse or even a creditor. The “interest” does not even have to be financial – it can include, for example, an interest in the welfare of an incapacitated person whose guardianship is provided for in the will.
To contest a will:
- you must act within two years after the date that the will is probated,
- if you were a minor when the will was probated, you have until your 20th birthday to act,
- If you were a servicemember when the will was probated, you typically have until 2 years after termination of service to file a contest, and
- in cases of fraud there is no formal time limit, as long as you act with reasonable haste after detecting the fraud.