Your Estate Could be Bankrupt Unless You Protect Against This
Whether you’re a successful business owner, a family of wealth or just average, middle-class folks, if you haven’t prepared for the possibility of lawsuits — baseless or not — your legacy could be on the line.


To be truly comprehensive, estate planning needs to be about more than passing your wealth down to your heirs. It needs to be about how to protect it while you’re still alive.
To illustrate the point, let’s examine the case of Sara and Jonah Williams, a hypothetical couple who worked for over 30 years to build their fledgling fast-food business into a thriving franchise with stores throughout the nation. Then they got slapped with an unexpected and overly litigious lawsuit in which they were sued for millions of dollars.
Fortunately for the Williamses, they planned for the unexpected by fusing comprehensive estate planning with asset protection. Over the years this protection made certain they paid the least amount of taxes legally allowed while also maintaining the maximum level of asset protection possible against financially ruinous lawsuits.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In today’s litigious environment, it’s all about protecting your legacy.
Don’t Leave Yourself Vulnerable
Comprehensive estate planning involves both conventional estate planning structures to maximize the amount one may pass along at death, as well as effective asset protection structures to insulate one’s wealth from devastating lawsuits prior to death.
Traditional estate planning works on only half of the problem, namely passing wealth on to heirs. But what is often overlooked, to the detriment of the client, is a catastrophic lawsuit arising during the client’s lifetime costing them all or a substantial part of their assets.
Affluent families and successful business owners are routinely targets for lawsuits — often devoid of legal merit — because the plaintiffs and their lawyers know the defendant, at the end of the day, will settle rather than remain embroiled in lengthy litigation. Without proper asset protection planning in place well before any legal claim, all could be lost.
For example, I know of a partner in a real estate development who was hit with a $60 million joint and several judgments when his partner was adjudicated having breached his fiduciary duty to his principal, even though the partner had never even met or had anything to do with the plaintiff.
A Problem Not Just for the Rich
You might think that this type of protection is only for the wealthy, but even those with more moderate estates can benefit from this form of planning That’s because a person with a $10 million net worth who gets hit with a $5 million lawsuit judgment still has $5 million left to live on. However, a person with a modest $3 million estate who gets hit with a $5 million judgment is rendered insolvent.
Removing the prospect of collectability from a legal judgment forces most plaintiffs to settle early and inexpensively, enabling clients who want to hold on to what they have worked so hard for over the years to protect their families. Ways to accomplish this could include strategies that allow you to control your wealth but not own it, such as:
- Limited partnerships
- Limited liability companies
- Foreign asset protection trusts
- A Private Retirement Plan (for California residents)
If an individual’s assets are protected in one of the vehicles described above, their assets become exempt from judgments.
Some wonder if going offshore is illegal. The IRS wouldn’t print all of the forms one is required to file when undertaking this method of planning if going offshore were a crime. The goal of asset protection is to remove the economic incentive for new creditors to go after assets that are securely in a trust.
Getting back to the case of the Williams family, because their comprehensive estate plan included proven strategies that also protected their assets from future liability claims, they were able to negotiate a very favorable settlement with the plaintiff, since the prospects of recovery beyond the settled amount were quite speculative.
Working with a professional who specializes in both reducing death taxes and establishing “firewall” protection to dissuade catastrophic lawsuits and encourage early settlements can create more robust estate planning structures, which discourage frivolous lawsuits and other opportunistic litigants.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jeffrey M. Verdon, Esq. is the lead asset protection and tax partner at the national full-service law firm of Falcon Rappaport & Berkman. With more than 30 years of experience in designing and implementing integrated estate planning and asset protection structures, Mr. Verdon serves affluent families and successful business owners in solving their most complex and vexing estate tax, income tax, and asset protection goals and objectives. Over the past four years, he has contributed 25 articles to the Kiplinger Building Wealth online platform.
-
Mississippi Tax-Free Weekend 2025 Is Here: What to Know Before You Shop
Tax Holiday Just in time for Prime Day, Mississippi is celebrating a tax holiday in July. Find out how you can save on back-to-school essentials.
-
$280 Million Boost Revives Florida’s Home-Hardening Grant Program
A major infusion of state funds revives Florida's flagship home-hardening grant program to protect homeowners and potentially lower insurance costs.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'
Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to Skip
A business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Financial Fact vs Fiction: Why Your 'Magic Number' Isn't Actually Magical
Do you think you're diversified if you're invested in the S&P 500 and Nasdaq? Do you think your tax rate will fall in retirement? Think again — and read on for other myths that could be leading you astray.
-
Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
The law makes opportunity zones permanent, creates enhanced tax benefits for rural investments and opens up new strategies for investors to combine community development with significant tax advantages.
-
Five Ways Retirees Can Keep Perspective Through Market Jitters
Market volatility is a recurring event with historical precedents (the dot-com bubble, global financial crisis and pandemic), each followed by recovery. Here's how people who are near or in retirement can navigate economic uncertainty.
-
I'm a Financial Strategist: This Is the Investment Trap That Keeps Smart Investors on the Sidelines
Forget FOMO. FOGI — Fear of Getting In — is the feeling you need to learn how to manage so you don't miss out on future investment gains.
-
Can You Be a Good Parent to an Only Child When You're Also a Business Owner?
Author and social psychologist Susan Newman offers advice to business-owner parents on how to raise a well-adjusted single child by avoiding overcompensation and encouraging chores.
-
How Advisers Can Steer Their Clients Through Market Volatility (and Strengthen Their Relationships)
Financial advisers need to be strategic when they communicate with clients during market volatility. The goal is to not only reassure them but to also help them avoid rash decisions, deepen your relationship with them and build lasting trust.