Imagine your teenager throws a party while you are out of town. Word spreads like wildfire, and soon your house is packed with more partygoers than your child had possibly imagined. Alcohol finds its way into the hands of those who should not have it, and the situation escalates further. Tragically, one of your child’s friends trips, falls into your pool, and hits their head. They are immediately rushed to the hospital. As we all know, medical fees for a serious injury can total to an exorbitant amount. The family, stressed and terrified of the hefty hospital bill about to come their way, decides to sue you for negligence and to cover their medical fees. The questions are: Are you liable? What can you lose? And, how can an attorney help?
How responsible are you?
In all 50 states, parents are responsible for malicious or willful property damage committed by their children. However, in many states, parents may have responsibility for negligence in failing to supervise their children, meaning that they are even liable for accidents. The term “civil parental liability” refers to the fact that parents are financially responsible for the actions of dependent children who are, in New York State, between the ages of ten and eighteen and living at home. Families with income, a home, or other assets should always consider their risk and liability exposure as there is invariably a lawsuit risk when it comes to the actions of children in family homes. Having homeowner’s insurance is an important step to take, seeing as it can cover some risks, but not all. For instance, it is a legal requirement in New York State that you have your pool surrounded by a fence, but many choose not to follow this law. In the event of an accident, if you did not have a fence, this would leave you open to a lawsuit. The settlement would most likely force you to pay out of pocket. This is because homeowners insurance can only protect you in situations where you meet the legally stipulated safety requirements. You are at risk of losing your assets if you are sued for something that occurs in your home, even if you were not present. It is daunting to be so legally exposed, but there are steps you can take to secure your assets before something happens.
Measures To Protect Your Assets: Asset Protection Trust vs. Irrevocable Trust
Asset Protection Trust
Aside from making sure that your house sufficiently meets the housing code requirements in your area, you can create an asset protection trust to help secure your assets in the event of a lawsuit. Most estate planning trusts serve as vehicles to pass assets down to beneficiaries. In contrast, asset protection trusts are created for the distinct purpose of forming a legal separation between the assets and the individual who created the trust, serving to protect your private property, income, and homes in the event of a lawsuit. When you create an asset protection trust, you transfer legal ownership of the assets within the trust to a trustee. Since these assets are no longer considered personal assets, they cannot be seized or liquidated in the event of a lawsuit. By creating an asset protection trust you can proactively secure your valuable possessions, income streams, and residences, ensuring their continued protection and availability even in the face of unexpected legal challenges.
Irrevocable Trust
You can also create an irrevocable trust as part of your estate plan. An irrevocable trust requires you to name certain beneficiaries who will obtain your assets after death. By placing assets in an irrevocable trust, you remove them from your personal ownership and effectively reduce their value in relation to your taxable estate. In addition, an irrevocable trust can shield your assets from nursing home and long-term care expenses, which is especially helpful in situations where Medicare eligibility is a concern. As the name states, once assets are placed into the trust it generally cannot be altered or revoked without the consent of the beneficiaries and the trustee. While your assets are relatively secure in an irrevocable trust, there is still a chance they may be at risk depending on your state’s laws.
These trusts are essential if your children often throw parties or even have friends over. It is important to monitor your children and educate them on the risks of hosting parties, with or without your presence. It is essential to note that these trusts must be established well in advance of any legal action, and you cannot take these steps once there is a claim or the threat of a claim being filed against you.
It Could Happen To You Too!
Accidents happen, and they most often occur when we least expect them. The most dangerous mistake is thinking that something could “never happen to me”. Having children, especially pesky teenagers, exposes you to a significant amount of liability. In order to ensure that you are protected in the event of an incident resulting in a lawsuit, it is important to explore your asset protection options. It is essential to have a knowledgeable and experienced attorney by your side who will guide you through a personally tailored plan that is suited to your needs. If you have any questions or are ready to begin your estate planning journey, please contact the Law Office of Inna Fershteyn at (718) 333–2394.