4 Signs That Assets are at Risk to Lawsuits in NC
North Carolina is often referred to as a debtor-friendly state due to the many statutory creditor protections state law provides. However, even with these protections there are individuals and businesses who may not structure assets properly to take advantage of available protections. Furthermore, the law protects certain assets against lawsuits and judgments in some cases, which means most individuals are vulnerable to claims if they have not planned appropriately.
Lack of Limited Liability Company. A Limited Liability Company (LLC) can be used to hold business assets. In the event a member of the company faces personal debt issues, the business assets remain exempt from personal creditor claims. There is a sole method available for creditors of personal debt to tap a member’s LLC ownership interest: a charging order.
Real property title ineffective. North Carolina real property title options allow for various protections. Married couples enjoy added protections if they own property as Tenants by the Entirety. (More information at the prior link about added protections that became effective in 2015.) This method of holding title prevents claims against an individual spouse from being tied to the jointly-owned property. Essentially, only claims made against both spouses would apply to the property. Married and unmarried couples, as well as individuals, can enjoy added protection by transferring property to an irrevocable trust. Any claims made against the individuals would not be attached to the property since the trustee ‘owns’ the property.
Saving outside of retirement accounts. Individuals accumulating savings for retirement outside of Individual Retirement Accounts, 401(k) plans, trusts, and retirement annuities may be risking their retirement assets. Retirement accounts in North Carolina are exempt from most creditor claims. A handful of years ago, North Carolina added creditor protections for inherited IRAs, which further expanded the long-term preservation of accounts.
Lack or lapse of business liability insurance. While business liability insurance is imperative for business owners and those with significant holdings and interest in companies, some insurance scams exist. The North Carolina Department of Insurance maintains two statuses for insurance companies: licensed or authorized. Learn more about these differences in the NCDOI’s guide to “Insurance for Your Business.”
North Carolina asset protection and trust attorney Gregory Herman-Giddens, JD, LLM, TEP, CFP leads a Lunch-and-Learn seminar in Chapel Hill on May 16th. Learn about risks and how you can protect yourself, your family, and your property. This is an information-packed event that will help attendees effectively adjust their plan to protect their assets. The seminar is free for TrustCounsel’s PlanGuard members. Learn more here.
