Friday, April 30, 2010
Protecting Your Assets from Lawsuit - Part 1 - Stewart Welch III
There is a litigation crisis in America where the mantra is, “Sue everybody and we’ll sort it out later’. It is estimated that there are over 1 million lawyers in America…one for every 300 citizens. So what are the chances of you getting sued sometime during your lifetime? Turns out they’re pretty good. In fact, some research suggests that you’ll be involved in an average of five lawsuits during your lifetime. So if we can agree that there is at least a risk of you getting sued, wouldn’t it make sense to develop an asset protection strategy?
Over the next few weeks, I’ll cover a wide range of strategies that discusses lifestyle; insurance; titling of property; trusts; and estate documents.
Monitor your lifestyle. At the most basic level, your lifestyle can either minimize or elevate your risks of a lawsuit. Some of the obvious things would include not drinking and driving; observing the speed limits; securing a fence around your pool; etc. For example, research proves that talking on the phone while driving is the equivalent of driving while slightly intoxicated. Driving while texting on your phone is the equivalent of driving while drunk. I was recently sitting at a red light when a young lady whose attention was momentarily diverted scraped my bumper. No one was hurt but the damage to my scraped bumper was still $1200 and the costs of repairing her car, I suspect, was much more.
To Do: Take a moment to think about how you could reduce lawsuit risks related to your lifestyle.
Insurance as your first line of defense. A number of years ago, a client and his family were driving to the airport in Denver, Colorado after a week of snow skiing. It was a beautiful sunny day with clear roads. Suddenly, he hit a patch of ice and his car slid into the oncoming lane. Fortunately, he and his family had buckled up and were not injured. Unfortunately, the two young ladies in the other car had not buckled up and both came through the windshield causing severe facial lacerations. They sued and won a judgment in excess of $700,000. If my client’s auto liability coverage had been, say $50,000, where would the young ladies’ attorney gone to satisfy the balance of the judgment? Answer: His personal assets. Fortunately, we had wrapped his auto and homeowners insurance with a $1 million Umbrella Liability policy.
In my experience, most people do not carry umbrella liability coverage, yet it’s perhaps the least expensive and most effective way to shield your assets from lawsuit. An umbrella liability policy typically has a very large deductible, say $300,000 or $500,000, but then covers any liability that arises from an auto or homeowners claim up to $1 million above your deductible. In order to avoid having a ‘gap’ in coverage, you’ll need to make certain that your auto and homeowner’s coverage limits are equal to your umbrella deductible.
To Do: Meet with your property and casualty agent and have him or her add an umbrella liability policy for a minimum of $1 million. This policy often costs less than $300 per year but you may have to increase coverage for your auto and homeowners insurance.
Over the next few weeks, I’ll cover a wide range of strategies that discusses lifestyle; insurance; titling of property; trusts; and estate documents.
Monitor your lifestyle. At the most basic level, your lifestyle can either minimize or elevate your risks of a lawsuit. Some of the obvious things would include not drinking and driving; observing the speed limits; securing a fence around your pool; etc. For example, research proves that talking on the phone while driving is the equivalent of driving while slightly intoxicated. Driving while texting on your phone is the equivalent of driving while drunk. I was recently sitting at a red light when a young lady whose attention was momentarily diverted scraped my bumper. No one was hurt but the damage to my scraped bumper was still $1200 and the costs of repairing her car, I suspect, was much more.
To Do: Take a moment to think about how you could reduce lawsuit risks related to your lifestyle.
Insurance as your first line of defense. A number of years ago, a client and his family were driving to the airport in Denver, Colorado after a week of snow skiing. It was a beautiful sunny day with clear roads. Suddenly, he hit a patch of ice and his car slid into the oncoming lane. Fortunately, he and his family had buckled up and were not injured. Unfortunately, the two young ladies in the other car had not buckled up and both came through the windshield causing severe facial lacerations. They sued and won a judgment in excess of $700,000. If my client’s auto liability coverage had been, say $50,000, where would the young ladies’ attorney gone to satisfy the balance of the judgment? Answer: His personal assets. Fortunately, we had wrapped his auto and homeowners insurance with a $1 million Umbrella Liability policy.
In my experience, most people do not carry umbrella liability coverage, yet it’s perhaps the least expensive and most effective way to shield your assets from lawsuit. An umbrella liability policy typically has a very large deductible, say $300,000 or $500,000, but then covers any liability that arises from an auto or homeowners claim up to $1 million above your deductible. In order to avoid having a ‘gap’ in coverage, you’ll need to make certain that your auto and homeowner’s coverage limits are equal to your umbrella deductible.
To Do: Meet with your property and casualty agent and have him or her add an umbrella liability policy for a minimum of $1 million. This policy often costs less than $300 per year but you may have to increase coverage for your auto and homeowners insurance.
Friday, April 23, 2010
Thursday, April 22, 2010
Creating Alternative Sources of Income
Over the past several weeks, I’ve discussed retirement strategies based on whether you’re in your twenties to thirties; forties to fifties; or are in your sixties with retirement just around the corner. To review those column’s go to the Resource Center at www.welchgroup.com; click on ‘Links’; then ‘Stewart’s Column’.
One retirement solution everyone should consider is creating one or more alternative sources of income. While this may seem to be a daunting task, you may just discover that it’s easier than you think. Consider these success stories:
Years ago, a stockbroker discovered the love of running. While being a stockbroker provided the income to drive his lifestyle, for fun he began to organize runs with small groups of people on a weekly basis. One thing he noticed was that there were a number of novice runners who were interested in becoming more proficient and had goals of running in, and completing a marathon. He developed a novice running club and charged a small fee as he organized and taught a disciplined running regime that would prepare these novices for a marathon. He found that the club members loved the program and began to spread the word. He also discovered how much he loved combining his love of running with his new passion for teaching and seeing how it changed lives. Turns out that he wasn’t just teaching running, he was also teaching life skills.
A friend of mine was looking for an alternative income source; specifically he wanted something he could turn into passive income where his involvement would be minimal. He looked at many options and finally decided on an Internet-based discount retail purchasing web portal that allowed him to purchase everyday products at a discount plus add additional friends, family and other families where he would receive cash incentives for their purchases as well. If these new ‘customers’ also recruited customers, everyone would benefit. He worked diligently for three years building his new ‘business’ and today, spending only three hours per week has a monthly income exceeding $20,000!
Do you have to have a bunch of money to start up your own business? Consider a recent case. This gentleman in his late sixties was not content to drift into the sunset of retirement and, after much research, decided on a franchise business to buy. He had a great idea, a good business plan but lacked the capital to launch his business. He took the business plan to a group of investors who funded the project on a partnership basis.
What you should do. Make a list of all of the things that you love to do. Start with things that you are really passionate about. Note that for each item, there is someone who is making a pile of money with a business based on what you love to do. You could model them or create an innovative alternative. Brainstorm the possibilities and see what you come up with. In this economy, now is a great time to start a business. If you can make it work now, it’ll take off once the next economic boom gets under way. For more information about starting your own business, visit www.entrepreneur.com.
One retirement solution everyone should consider is creating one or more alternative sources of income. While this may seem to be a daunting task, you may just discover that it’s easier than you think. Consider these success stories:
Years ago, a stockbroker discovered the love of running. While being a stockbroker provided the income to drive his lifestyle, for fun he began to organize runs with small groups of people on a weekly basis. One thing he noticed was that there were a number of novice runners who were interested in becoming more proficient and had goals of running in, and completing a marathon. He developed a novice running club and charged a small fee as he organized and taught a disciplined running regime that would prepare these novices for a marathon. He found that the club members loved the program and began to spread the word. He also discovered how much he loved combining his love of running with his new passion for teaching and seeing how it changed lives. Turns out that he wasn’t just teaching running, he was also teaching life skills.
A friend of mine was looking for an alternative income source; specifically he wanted something he could turn into passive income where his involvement would be minimal. He looked at many options and finally decided on an Internet-based discount retail purchasing web portal that allowed him to purchase everyday products at a discount plus add additional friends, family and other families where he would receive cash incentives for their purchases as well. If these new ‘customers’ also recruited customers, everyone would benefit. He worked diligently for three years building his new ‘business’ and today, spending only three hours per week has a monthly income exceeding $20,000!
Do you have to have a bunch of money to start up your own business? Consider a recent case. This gentleman in his late sixties was not content to drift into the sunset of retirement and, after much research, decided on a franchise business to buy. He had a great idea, a good business plan but lacked the capital to launch his business. He took the business plan to a group of investors who funded the project on a partnership basis.
What you should do. Make a list of all of the things that you love to do. Start with things that you are really passionate about. Note that for each item, there is someone who is making a pile of money with a business based on what you love to do. You could model them or create an innovative alternative. Brainstorm the possibilities and see what you come up with. In this economy, now is a great time to start a business. If you can make it work now, it’ll take off once the next economic boom gets under way. For more information about starting your own business, visit www.entrepreneur.com.
Tuesday, April 13, 2010
“Retirement for the Ages- Part III”
Last week I began a discussion about retirement strategies for those of you who are in your sixties and can see the light at the end of the retirement tunnel. Some of you may have discovered that the light is actually an oncoming train! I began with the importance of figuring out just how much money you will need by using a simple retirement financial calculator at the Resource Center at www.welchgroup.com; click on ‘Links’; then ‘Retirement Planning Calculator’. Strategies for creating a comfortable retirement included continuing to work on a full or part-time basis and downsizing your lifestyle. Here are a few additional strategies:
- Focus on debt elimination. One of the best ways to approach retirement planning is to pay off all your debts including your home mortgage. Start by writing down every loan you have; how much you owe; what your monthly payment is; and what your interest rate is. Use one page per loan. Shuffle your pages so that the loan with the highest interest rate is on top. Use any ‘extra’ money to accelerate the payoff on this loan while paying the minimum payment on all other loans. When the top loan is paid off, take its payments plus your ‘extra’ payments and apply to the next loan. Continue this process until you are debt free. The ‘mathematics’ of this strategy will detonate your debt in a few short years.
- Review all insurance coverage. When you add up all of the premiums that you pay for all of the various types of insurance coverage you own, it can easily add up to 15% - 30% of your after tax retirement income. Commit to reviewing every insurance policy you own with the goal of cutting premiums 50%. In some cases you’ll discover you are paying for coverage that you no longer need. In other cases, by shopping around, you find more competitive pricing. Finally, consider raising your deductibles (property & casualty insurance and health insurance) or lengthening the waiting period (long-term care insurance) before benefits begin. For this exercise, you may need help. See my next recommendation.
- Get professional help. If all of this seems overwhelming, consider meeting with a qualified financial advisor. They are trained to help you work through these complex issues. For a list of fee-only certified financial planners in your area, visit www.cfp.net.
- Reorient your investments. As a pre-retiree, it’s time to take a fresh look at all of your investments. What was appropriate during your accumulation years may need to be repositioned with a more income-oriented slant. For example, our pre-retiree portfolios are dominated by Blue Chip dividend-paying stocks instead of more growth-oriented stocks. And while the current interest rates on bonds is anemic, consider what your target allocation to bonds should be as interest rates ‘normalize’ over the next few years.
- Create additional income sources. A great time to launch a small start-up business is while you’re still working. Most people have something they are passionate about outside their job. Do you have a hobby that you could turn into a source of income?
Saturday, April 10, 2010
Make Me Think ...
"We succeed only as we identify in life, or in war, or in anything else, a single overriding objective, and make all other considerations bend to that one objective."
~ General Dwight David Eisenhower (1890-1969)
34th US president 1953-61, Supreme Allied Commander, WW 2, Europe.
~ General Dwight David Eisenhower (1890-1969)
34th US president 1953-61, Supreme Allied Commander, WW 2, Europe.
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