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Jul 23 2012 12:00AM

Question

How can I protect my assets from litigation?

Answer

The best way to protect your personal assets is to carry sufficient liability insurance through your automobile and homeowners/renters policies. You may also want to purchase a personal umbrella liability policy. Umbrella policies are issued in $1 million increments, are very reasonably priced and supplement your auto/homeowner's policies.

People often overlook insurance as the first line of defense against lawsuits. Talk to your agent about the amount of coverage to buy. He or she will take into consideration your current net worth, future earnings and how visible you are in the community. If you drive a luxury car, live in an expensive home and are frequently featured in the media for your generous charitable donations you could be a very visible target for potential litigation. The right amount and mix of personal liability insurance will be very inexpensive protection.

If you own rental properties, consult with an attorney about using a limited liability company (LLC) to own your properties. As the name implies, owning each property inside its own LLC may protect your remaining assets from liability stemming from litigation regarding that one property.

Finally, business owners often use a combination of business liability insurance and legal business entities, such as limited liability companies or corporations, to protect their business assets.

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