Ways For Directors and Executives To Protect Themselves

Executive-liability insurance is the first protective option for executives and directors who are likely to be subjects of investor lawsuits. For others who do not use such coverage, asset-protection trusts are a great option.

Virginia recently signed legislation to permit asset-protection trusts in his state, making a total of 13 states that offer such protection. Clients should not put more than 50% of their net worth into these trusts. They generally cost between $5,000 to $10,000 for initial fees plus an annual fee ranging from $3,000 to $5,000. Depending on which state you’re setting up the trust in, your exemptions will vary. Some states offer unlimited exemptions for primary residences, while others put a dollar-value cap on their exemptions.

Timing is very important with setting up these trusts, because you cannot set them up once an incident that might trigger a claim or precede a bankruptcy has occurred. To set up a trust after such an event could be considered defrauding creditors, which is prohibited by state laws allowing these trusts.

The best assets protection plans have multiple protections. Umbrella insurance is an additional method wealthy people can use to protect their assets. Costs for these policies vary regionally and depend on what you want to insure.

See Wealthy Turn To Trusts To Shield Assets, Private Wealth, May 23, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.