In recent years, courts, state legislators, and clever trial attorneys have dramatically expanded traditional theories of negligence. As stated, negligence means a failure to exercise the proper degree of care. The question is what is the proper degree of care? How careful must we be?
In an iconic case, the rock group Black Sabbath was sued by the parents of a teenage boy who committed suicide. The parents claimed that the boy had been encouraged to commit the act by listening to certain lyrics on a record album. Although it was ultimately determined that the group was not liable for the boy’s death, the case did make it all the way through trial. The members of the group sat through countless hours of depositions and testimony and surely spent several hundred thousand dollars in legal fees. All of this time and money were wasted because an attorney for the boy’s parents attempted to connect a remote Deep Pocket Defendant to the case in order to obtain compensation for this unfortunate, but blameless event.
Take this example. Meticulous Max noticed that the brakes on his car were not working properly. Feeling the car was unsafe to drive, on Monday, Max made an appointment for his mechanic to pick up the vehicle in a tow truck on Wednesday. Late Monday night the car was stolen. As the thief was driving away in the car, the brakes failed and he crashed into another vehicle. The person driving the other car, Bob Brown, was injured in the accident. Bob sued Max alleging that Max was negligent in failing to properly maintain his automobile. The plaintiff argued that because of the high incidence of stolen cars, Max “should have” reasonably foreseen that his car might be stolen, and, if stolen, the faulty brakes would likely cause injury to someone. On this theory, Bob was successful and was awarded $325,000 by the jury. Clearly, Max thought he was exercising due care by not driving his car and by arranging for an appointment to have the brakes fixed. However, the jury expanded the concept of “due care,” ruling that Max acted improperly by agreeing to wait two days to have his car repaired.
This leaves us with a legally required standard of behavior that cannot be ascertained in advance. (And with which most people in Max’s town would disagree.) We know we have to be careful, but we do not know what that means. It is impossible to anticipate what standard a jury will impose with the advantage of hindsight. That is the problem.
Removing the Incentive to Sue You
The first goal of a sound financial plan is to protect your personal and business assets from potential lawsuits and claims. We will discuss this in great detail in later chapters. For now, keep in mind that assets such as your home, your bank accounts, and your brokerage accounts can be moved into a properly designed plan. Someone wanting to see what you have will not find assets reachable and available.
Since the lawyer for a potential plaintiff will usually only sue you if he knows there are assets and he knows he will get paid, it is extremely unlikely that any lawyer would be willing to file a case against you. You can successfully discourage lawsuits by holding your property in a protected manner, without revealing to the world what you own and how much you have. That’s the first important objective that you can accomplish. The importance of these asset protection strategies will be emphasized as we present this material.
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Coming next: How anyone Can Find Out What You Own