Key takeaways in this article include:
- If you face a lawsuit, reviewing your situation thoroughly is crucial. Consider different possible outcomes and how they might affect you. Thinking ahead can make a difference.
- Don’t go it alone. Gather a team of knowledgeable people who can offer advice and support. This team can be a mix of professionals and trusted individuals who understand your situation.
- It’s the right time to either create a plan to protect your assets or give an existing one a fresh look. This step is about making sure what you own is safeguarded, especially in light of the current challenge you’re facing.
It’s probably not a shock knowing that the U.S. has long been recognized as one of the most litigious nations in the world. In fact, it may be the most litigious. Anyone can sue anyone else, even if there is no validity of the case.
So, the question then becomes how can you protect what you’ve worked so hard to build if, someday, someone sues you for some real or perceived wrong you’ve done? This is especially true if you own a business or have substantial wealth. These two characteristics can make you a high-value target for a lawsuit.
If you look at people we define as super-rich (those with a net worth of $500 million or more), they are fully aware of the litigation risks they potentially face. They use asset protection planning to shield their assets from future lawsuits and creditors. Think of an asset protection plan that works like a moat around a castle. Much like risk management strategies in finance, the moat serves as a defensive barrier.
We can all learn from this practice as we look for ways to protect our wealth.
That said, asset protection strategies don’t always guarantee that your wealth is secure. For example, you must have an asset protection plan before being sued. Actions taken to shield assets after a lawsuit has been filed are likely to be reversed by the courts. And even when steps are taken to protect your wealth, you can still be sued.
Worse, depending on your level of wealth, the asset protection strategies you have implemented, and other circumstances, you could still lose a great deal in a lawsuit.
Even if you employ legal and financial strategies to protect your wealth, potentially devastating lawsuits may sometimes be unavoidable.
Bottom line: If a nasty lawsuit is inevitable, you can take steps that may defuse the situation.
Coordinating a Team Response
It’s very common for the super-rich to use the services of specific professionals to assist with the lawsuits they face to avoid litigation. Different types of professionals may get involved depending on the nature of the issues.
If multiple professionals become involved in the process, there will likely be a coordinator, often referred to as a litigation problem-solver. At the same time, savvy lawyers are regularly a necessity, and they usually take a leading role in defusing litigious situations.
Attorneys are particularly effective in this role, given their negotiation skills. Their ability to know when to push, when to give ground, and how to position things is often crucial to defusing confrontations. Ideally, you want to work with an experienced litigator.
Understanding the ins and outs of litigation is essential, as it shapes the negotiations. And should the negotiations fail, preparing for the inevitable trial is necessary.
Litigation problem-solvers must also have an extensive network of powerful relationships with other professionals to draw upon. For example, a lawyer might benefit from being able to bring in leading private investigators or even turn to the police.
Often, it’s about the people they know, their connections to those people, and what favors they can call in. Consequently, lawyers and others who work in the same community as the person being sued can potentially have an advantage over professionals who don’t reside in your community.
You’ve Been Sued – Now What?
Typically, a process is followed to deal with the impending or threat of litigation. This process involves a series of steps. However, because of the nature of litigation, there is often a lot of back-and-forth and adjustments — so these steps are far from set in stone.
Usually, the process is triggered by a lawsuit or the realistic possibility of that happening. Then, you can assess the severity of the situation to determine appropriate next steps.
This requires a very detailed analysis of the potential threat. The possible impacts on your world should be evaluated. This is considered as the “internal assessment”. Most of the time, some form of scenario analysis is employed. Here, the “what if” questions are addressed.
Some examples include:
- How might my family react to the charges?
- What would be the impact of the lawsuit on my business?
- What might happen during the legal discovery process?
- How will the lawsuit be seen by my friends?
- What will the lawsuit do to my reputation in the community?
It can be useful to detail all the implications of the lawsuit, from going to court to settling the matter privately. For many people, there is often a great deal of emotional stress resulting from significant lawsuits.
The stress impacts the person being sued and can have a ripple effect — causing complications within the family and the business. Additionally, lawsuits can become distracting and get in the way of effectively managing a business.
The “external assessment” is a deep dive into the person or organization suing you. The more known about these parties — from their motivations to the consequences of winning or losing the case to the resources they have in their corner — the better. (Investigators might even be enlisted to help develop a better understanding of these parties.
Armed with information and insights, the next step is to attempt to work out a deal. The goal is to negotiate a mutually acceptable solution that avoids going to court. This can be straightforward — or it can be amazingly difficult and complicated.
The bargaining process tends to be influenced most significantly by three issues:
- The facts in the case.
- The “leverage” each side has.
- The egos of the different parties.
While negotiating, the two sides will likely continually update their assessments. The negotiations per se will provide a greater perspective. Meanwhile, each side can continue to look internally and externally.
The result will be either success (an agreement between the parties that avoids litigation) or failure (which means going forward with a lawsuit). If a lawsuit proves unavoidable, all the work done to date should be beneficial in making the case in court.
Updating an Asset Protection Plan
Asset protection planning can help dissuade some people from suing you and persuade them to negotiate a settlement. This type of planning is not designed to hide your wealth but rather to use legal strategies and financial products to shield your assets from litigants.
Having a well-defined asset protection strategy in place can be very beneficial, as it can intimidate potential litigants if they see the strong barriers you’ve built around your wealth.
Even though many super-rich incorporate asset protection planning into their wealth planning, they tend to reevaluate this aspect in the wake of actual or potential litigation.
Typically, that means they want to:
- Find and correct clear weaknesses in their current planning.
- Enhance existing safeguards.
- Put more safeguards in place.
The logic here is fairly simple: The experience of being sued or potentially being sued is such that the super-rich want to avoid the experience in the future as much as possible. So, they regularly review and update/upgrade their existing asset protection plans.
They may also stress-test their plans to see how existing plans would hold up under various litigation scenarios they might face.
When facing lawsuit issues, the super-rich often use litigation problem-solvers. These professionals (often lawyers) don’t typically promote their services due to the nature of their work. They tend to accept new clients only by referral.
You used to need roughly $500 million or more in net worth to access a litigation problem-solver. Today, these professionals are making themselves available to people who may be considered affluent but aren’t close to the $500 million or more in net worth level.
Often, litigation problem-solvers are best known among top wealth managers and similar professionals with networks of experts with whom they work to provide a broad range of planning services. For example, a business owner might not know the best lawyer to turn to when addressing potential nasty litigation — but their wealth manager might.
If you or someone you know is dealing with issues around lawsuits and litigation — or if you’re simply concerned about how well your assets are safeguarded from people who might want to take them from you — consider contacting Mitch Silberman, an elite wealth manager in Nashville, for guidance. He may have access to a team of professionals who can help you engage in asset protection planning.
ACKNOWLEDGMENT: This article was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families and is distributed with its permission. Copyright 2023 by AES Nation, LLC.
This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks, and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing. Mitch Silberman is a registered representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and registered investment adviser. Advisory Services offered through Silberman Wealth Strategies, Inc. Cetera is under separate ownership from any other named entity. Mitch Silberman and Silberman Wealth Strategies, Inc. are not affiliated with AES Nation, LLC. AES Nation, LLC is the creator and publisher of the VFO Inner Circle Flash Report.
For a comprehensive review of your personal situation, always consult your legal advisor. Neither Cetera Advisor Networks LLC, nor any of its representatives may give legal advice.