Accidents and risk to 401K's

[Bryan Wood]

I've been debating whether to bring this up for discussion or not here on the forums and have decided to do so. Recently I learned while talking to a friend that his father in law had been found at fault in a car accident and his 401K was successfully sued and emptied by the lawyers representing the person that was hurt in the accident. For some reason the thought of this happening had never crossed my mind as if a 401K was somehow protected from this sort of event.

With the backgrounds and exeriences of you folks out there, is there a way to shelter or protect ourselves on this? Obviously we have all taken on the risk of flying "Experimental" aircraft but this one sucks. Can trusts be set up that include 401K's and if so will the pre tax benefits still apply? Any info, anybody? Ideas, thoughts?

Best,

[TSwezey]

I didn't think they could hit retirement funds. That's how OJ Simpson has been able to keep his money.

[NYTOM]

Originally Posted by TSwezey

I didn't think they could hit retirement funds. That's how OJ Simpson has been able to keep his money.

I believe Florida has a law protecting one's home and retirement against lawsuits.

[cytoxin]

find a legitimate way to form an LLC. or so ive been told, by people that have them.

[szicree]

I had a student a while back whose adult daughter caused a serious car accident resulting in injuries to several people. The daughter had little to no money, but the mother and father owned a couple of homes, a boat, motorhome, etc. The injured parties' lawyers successfully sued the parents, arguing that they had accepted liability by allowing the daughter on their auto policy.

[John Clark]

Originally Posted by cytoxin

find a legitimate way to form an LLC. or so ive been told, by people that have them.

This subject was well covered in a previous thread. You might want to do a search on LLC. The bottom line is that the LLC will not protect you from your negligence.

John Clark
RV8 N18U "Sunshine"
KSBA

[RickWoodall]

I am NOT licensed in the US, but in Canada there are very specific rules, and through a bit of a loophole, (our 401Ks are called RRSP's) and if i put them in a mutual fund or other investment they can, in vigorous litigation be atttacked. BUT, if i have the very same retirment account for clients and invest it in products called seg funds (mutual funds provided by an insurance company) they offer a much much better layer of protection as they are no longer considered investments but insurance products. It is a technicallity and pretty much the exact same investment, but....in courts over and over the seg funds are protected and the mutual funds are open for litigation and creditor attack. Insurance companies have done a very good job of setting up special benefits and while one must do their homework...its worth the time and trouble if it saves your butt.
Certainly check with your investment person and if he/she is licensed for insurance and investments its a very very cheap extra layer of protection.

[Bob Brown]

That's why although you CAN cut corners by not having a medical, not doing a BFR, not maintaining your aircraft according to specs, not staying current, breaking altitude restrictions, etc...you are thereby negligent. If you are not negligent, you SHOULDN'T have anything to hide from. Of course we all know that's not the case all the time, most of the time it is. As far as an LLC goes, the idea there is to protect parties who were NOT negligent, from being liable in cases where negligence was present. So if you and I own an airplane as partners and you commit a negligent act and crash it, I can be liable. Theoretically, the LLC is to shield me from your negligence, if you commit a negligent act, I should not be liable for it. My whole point here is, we do live in a litigious society...and the best thing you can do to protect yourself is follow the rules and don't do things you could be found negligent for.

[frankh]

Nicely put Bob!

Frank

[TSwezey]

Originally Posted by RickWoodall

I am NOT licensed in the US, but in Canada there are very specific rules, and through a bit of a loophole, (our 401Ks are called RRSP's) and if i put them in a mutual fund or other investment they can, in vigorous litigation be atttacked. BUT, if i have the very same retirment account for clients and invest it in products called seg funds (mutual funds provided by an insurance company) they offer a much much better layer of protection as they are no longer considered investments but insurance products. It is a technicallity and pretty much the exact same investment, but....in courts over and over the seg funds are protected and the mutual funds are open for litigation and creditor attack. Insurance companies have done a very good job of setting up special benefits and while one must do their homework...its worth the time and trouble if it saves your butt.
Certainly check with your investment person and if he/she is licensed for insurance and investments its a very very cheap extra layer of protection.

I forgot about these! They have these in the US also. I do have some. My brother advised me about these to avoid lawsuits about 10 years ago.