Thursday, May 6, 2010

Philosophical questioning

Deep philiosophical thoughts don't normally enter into asset protection issues but I received two such questions at a civic club talk today.

Advantages of Raising onseself up by the bootstrap

First a doctor asked if, like Warren Buffet, we wouldn't be better off as society if we just cut our kids loose to fend for themselves, in effect what's the point of protecting our assets for them, They and society would be better off and more productive by letting them do it (life) for themselves.

I certainly have to agree that Fear of starvation can be a great motivator. Even so, Warren Buffet's sons probably have a leg up on most kids; best schools, training, experience of living with a successful man, name recognition in a job hunt, things most kids probably will not have, even if denied a few billions in inheritance.

I answered that when my dad needed more money he took a second job. In the 1950s a second job could pay the rent. Today, do something menial for an extra 20 hours and you probably wouldn't pay for the electric. New College grads are taking jobs for $25,000 despite being $20, $40 or even $100k in debt for education loans for training seldom translating into job specific readiness. In 1950, $2,000 a year prepped many to buy a starter house for $6 to $10k. In 1960 my aunt's employer was an 80 year old who invented the automatic gas pump handle. He made a fortune worth $200,000! When I met him he had two homes, one in Bridgeport, Ct and the other in Seattle and had spent 20 years traveling the globe, Probably on less than $4,000 a year. We grew up in a different age, before the dollar was worth less than a nickle.

Can kids be cut loose to earn a career? Some certainly. Most, I think, will never be able to acquire our standard of living. God willing, we won't go back to the hopelessness of the 1930s, the last time a generation earned less than its parents, but I think protecting my assets for my kids to have a better life makes so much more sense than letting the tax man or some sue happy lawyer take it all. I'll still have some left over for charity. Just a thought.

It's Unfair to our "Victims" to protect our assets

I have never seen this complaint before. One man asked about the morality of protecting one's wealth from someone we injured. Putting aside the kinds of frivolous suits that might keep one up at night for years and then take away everything you've worked for, Is there a moral imperative against protecting ones's family from a "Valid claim"?

This is an interesting question. In areas of the far east and some ancient cultures taking one's life meant you owed yours in service in return. Saving a life might mean taking responsibility for that life, for life. The American legal system doesn't require that of course, just "just compensation." Certainly, maintaing adequate insurance to provide such compensation is a requirement mentioned many times in this blog. Indeed failure to maintain adequate insurance opens the door for a court to undo asset protection entities upon finding of undercapitalization, ultra vires and/or various theories of equity. But what about the idea that our assets, above and beyond insurance, should be held for payment to our victims should such an dark eventuality arise?

Good question and one I can only answer like this: Isn't our first responsibility to our own families? Even if we agree to live in car to make good on a valid judgment, do we, and our families, have to assume such risks for bogus claims too? And If, for moral reasons, we believe we should pay everything for our mistakes, doesn't it make sense for that to be our decision rather than the system's. If you have an asset protection plan the decision becomes yours. Like Warren Buffet and his idea of the "underpaid" Tax Man, Warren can volunteer extra money to the IRS any time he wants (Notice that he doesn't). Guilt or "fairness" may lead people to help those who we've hurt and to me it means even more if voluntary, meaning from protected assets.

I understand the fairness concept. My neighbor once prayed that God stop a rival welder from taking unfair advantage of her business by parking his mobile unit across the street from her shop and taking business and food from the family table. When his truck went into a ditch and he was injured she felt so guilty she visited him daily in the hospital and helped pay his expenses. They became good friends and went on to work together.

I have never seen that result from a lawsuit, meritorious or not, but have seen runaway jury awards, predatory even extortionate claims, claimants who view the "no cost" aspect of suing like a free lottery ticket, and the high cost of defense leading some to settle even when "right."

Protect your assets. You can always pay voluntarily if you think that's fair.

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