The Wealth Advisor
What to Do If You Are in a Fender Bender and How It Might Affect Your Estate Planning
In the words of George R. R. Martin’s fictional characters from the noble house Stark, “Winter is coming.”
Along with this change of seasons comes a change in driving conditions in much of North America—slippery roads, rain, snow, less sunlight during the morning and evening commutes, and a variety of other hazards. Unfortunately, with an increase in such hazards comes an increase in the likelihood of being involved in a motor vehicle accident. But few of us have ever really considered what should be done if we are actually involved in a fender bender.
While certainly no two car accidents are the same, there are some general guidelines that you should follow as soon as possible after an accident.
First, check yourself and your passengers for any injuries. Ask everyone if they are okay before anything else. If it becomes apparent that someone, including yourself, is injured, call 911 and report the accident and the fact that there may be injuries so emergency dispatchers can send appropriate first responder help. When safety and health are at risk, your first priority should be ensuring that everyone involved can get the medical help they need as quickly as possible. If you are injured and cannot make the 911 call yourself, ask anyone you can communicate with to get medical help.
Next, if you and all involved appear to be safe and uninjured and you are not at risk of further danger from nearby traffic, find a safe location to move your vehicles to. If the accident involves someone else, exchange contact and insurance information with the other driver. This will ensure that you can get in touch with the other party to the accident if your insurance company or the police need to get involved to resolve any issues that arise or process insurance claims.
Also, even when accidents result in what appears to be only minor damage, it is still advisable in most cases to have the local police respond before the other driver leaves the scene. When it is time to file a claim with your insurance company (or respond to claims from the other driver about damages you may have caused), it is important to have a police report detailing the damages and who law enforcement determines was at fault. This will help you avoid being unfairly stuck with the liability for repairs or medical injuries that arise later (such as back and neck injuries).
Additionally, it is important to contact your car insurance company as soon as possible. You may want to contact them even before getting out of the car. The insurance company can provide you with crucial advice and guidance at a very stressful time to make sure that you do not make mistakes in dealing with the other driver that could have significant consequences when it comes to liability. Many people mistakenly believe that it is better not to report minor accidents to your insurer in an effort to prevent their premiums from increasing. However, this can be a dangerous approach. Failing to report an accident and allowing the insurance company to immediately get involved to mitigate possible claims for damages could lead to much larger claims against you personally and could result in your insurance company refusing to cover such claims due to your failure to report in a timely manner.
How Car Accidents Can Impact Your Estate Planning
Healthcare decision-making. In the event of an accident where you become unable to speak or make decisions for yourself as the result of an injury, you will need to have someone who can speak to doctors and medical providers on your behalf. If you have planned in advance, a medical power of attorney will allow someone you have chosen previously (your healthcare agent) to speak with doctors and arrange for treatment until you regain consciousness. If you do not have a medical power of attorney in place, decision-making authority could be unclear and might result in delays in receiving certain types of medical treatment. Thus, it is important that you not only have a medical power of attorney in place and signed, but also that you inform those closest to you about where to obtain a copy of it should you need to be rushed to a hospital in the event of an accident.
Adequate insurance coverage. Many people do not realize that carrying adequate insurance coverage is one of the most effective ways to protect themselves from lawsuits that would place their savings and property at risk. Ensuring that you carry adequate car insurance is one of the simplest ways to ward off a lawsuit. Beyond increasing your insurance limits on your car insurance, you may also want to discuss with your insurance broker whether it would make sense for you to purchase an umbrella insurance policy. Umbrella policies act as a form of backup insurance to your car insurance policy. Essentially, if you are involved in a car accident where the damages you caused exceed the limits of your car insurance policy, an umbrella insurance policy can step in and cover such excess liability. With both policies in place, you are providing a large enough pool of insurance money that your insurance companies will have a much greater ability to settle any lawsuit against you as a result of the car accident before it ends up in court where the plaintiff could seek payment from you directly.
As part of your estate planning, you should meet with your insurance advisor to discuss the limits of your car insurance and any umbrella policy that you may already have (or intend to purchase) and the types of protections that they provide. Adequate insurance can go a long way toward protecting your accounts and property from loss to a lawsuit as a result of a car accident.
Be Careful of Fraudulent Transfers
After a car accident where there are significant property damages and medical injuries, it can be tempting to take steps to protect what you own if you fear that a lawsuit may result from the accident. But it is important to resist the temptation to begin transferring your property and accounts to friends or family in an effort to hide what you own. In many states, taking such steps after an accident has occurred in which you are liable is considered to be a fraudulent transfer that can be ignored by the courts.[1] In other words, even though you may have made an otherwise legal gift or transfer of your accounts and property to someone else, the courts are likely to allow the party in a successful lawsuit against you to go after and seize the property that you have transferred to someone else in an effort to avoid having it used to pay the judgement against you. Furthermore, you could be liable for additional damages for causing the prevailing party in the lawsuit to expend extra effort and expense to pursue the fraudulently transferred property.
No, Revocable Trusts Do Not Protect Your Property from Lawsuits
Another very common misconception is that if you create a revocable living trust for estate planning purposes, you have also protected your assets from lawsuits and creditors. Unfortunately, this is simply not the case. While it is possible to design a revocable living trust that will protect your assets after you have died from the creditors and lawsuits of your named beneficiaries of your trust (usually your loved ones), revocable trusts in general offer no protection against your own creditors or lawsuits filed against you. This is because you have complete control over the property placed in your revocable trust. And because you retain the power to revoke the trust, a judge can order you to revoke the trust and use the trust property to pay your creditors and lawsuit judgements.
That being said, there are certain types of irrevocable trusts and other asset protection strategies that, if designed properly, can greatly enhance the level of protection you can obtain for your property. However, you should explore these with the assistance of an experienced asset protection and estate planning attorney to ensure proper creation and implementation.
When it comes to protecting your accounts and property, the time for taking the necessary steps is well before an accident occurs. Doing so will help you maximize the amount of asset protection that is available to you through purchasing insurance or designing estate planning features that have a much better chance of warding off successful lawsuits in the event of an accident.
We hope that we have given you some things to consider and encouraged you to revisit some aspects of your estate planning. Protecting your hard-earned accounts and property is a worthwhile investment of time and effort. But remember, the time to do so is before an accident occurs. If you are not sure where to start, give us a call. We would be happy to help you take the next step in preparing for the perils that winter can bring.
Along with this change of seasons comes a change in driving conditions in much of North America—slippery roads, rain, snow, less sunlight during the morning and evening commutes, and a variety of other hazards. Unfortunately, with an increase in such hazards comes an increase in the likelihood of being involved in a motor vehicle accident. But few of us have ever really considered what should be done if we are actually involved in a fender bender.
While certainly no two car accidents are the same, there are some general guidelines that you should follow as soon as possible after an accident.
First, check yourself and your passengers for any injuries. Ask everyone if they are okay before anything else. If it becomes apparent that someone, including yourself, is injured, call 911 and report the accident and the fact that there may be injuries so emergency dispatchers can send appropriate first responder help. When safety and health are at risk, your first priority should be ensuring that everyone involved can get the medical help they need as quickly as possible. If you are injured and cannot make the 911 call yourself, ask anyone you can communicate with to get medical help.
Next, if you and all involved appear to be safe and uninjured and you are not at risk of further danger from nearby traffic, find a safe location to move your vehicles to. If the accident involves someone else, exchange contact and insurance information with the other driver. This will ensure that you can get in touch with the other party to the accident if your insurance company or the police need to get involved to resolve any issues that arise or process insurance claims.
Also, even when accidents result in what appears to be only minor damage, it is still advisable in most cases to have the local police respond before the other driver leaves the scene. When it is time to file a claim with your insurance company (or respond to claims from the other driver about damages you may have caused), it is important to have a police report detailing the damages and who law enforcement determines was at fault. This will help you avoid being unfairly stuck with the liability for repairs or medical injuries that arise later (such as back and neck injuries).
Additionally, it is important to contact your car insurance company as soon as possible. You may want to contact them even before getting out of the car. The insurance company can provide you with crucial advice and guidance at a very stressful time to make sure that you do not make mistakes in dealing with the other driver that could have significant consequences when it comes to liability. Many people mistakenly believe that it is better not to report minor accidents to your insurer in an effort to prevent their premiums from increasing. However, this can be a dangerous approach. Failing to report an accident and allowing the insurance company to immediately get involved to mitigate possible claims for damages could lead to much larger claims against you personally and could result in your insurance company refusing to cover such claims due to your failure to report in a timely manner.
How Car Accidents Can Impact Your Estate Planning
Healthcare decision-making. In the event of an accident where you become unable to speak or make decisions for yourself as the result of an injury, you will need to have someone who can speak to doctors and medical providers on your behalf. If you have planned in advance, a medical power of attorney will allow someone you have chosen previously (your healthcare agent) to speak with doctors and arrange for treatment until you regain consciousness. If you do not have a medical power of attorney in place, decision-making authority could be unclear and might result in delays in receiving certain types of medical treatment. Thus, it is important that you not only have a medical power of attorney in place and signed, but also that you inform those closest to you about where to obtain a copy of it should you need to be rushed to a hospital in the event of an accident.
Adequate insurance coverage. Many people do not realize that carrying adequate insurance coverage is one of the most effective ways to protect themselves from lawsuits that would place their savings and property at risk. Ensuring that you carry adequate car insurance is one of the simplest ways to ward off a lawsuit. Beyond increasing your insurance limits on your car insurance, you may also want to discuss with your insurance broker whether it would make sense for you to purchase an umbrella insurance policy. Umbrella policies act as a form of backup insurance to your car insurance policy. Essentially, if you are involved in a car accident where the damages you caused exceed the limits of your car insurance policy, an umbrella insurance policy can step in and cover such excess liability. With both policies in place, you are providing a large enough pool of insurance money that your insurance companies will have a much greater ability to settle any lawsuit against you as a result of the car accident before it ends up in court where the plaintiff could seek payment from you directly.
As part of your estate planning, you should meet with your insurance advisor to discuss the limits of your car insurance and any umbrella policy that you may already have (or intend to purchase) and the types of protections that they provide. Adequate insurance can go a long way toward protecting your accounts and property from loss to a lawsuit as a result of a car accident.
Be Careful of Fraudulent Transfers
After a car accident where there are significant property damages and medical injuries, it can be tempting to take steps to protect what you own if you fear that a lawsuit may result from the accident. But it is important to resist the temptation to begin transferring your property and accounts to friends or family in an effort to hide what you own. In many states, taking such steps after an accident has occurred in which you are liable is considered to be a fraudulent transfer that can be ignored by the courts.[1] In other words, even though you may have made an otherwise legal gift or transfer of your accounts and property to someone else, the courts are likely to allow the party in a successful lawsuit against you to go after and seize the property that you have transferred to someone else in an effort to avoid having it used to pay the judgement against you. Furthermore, you could be liable for additional damages for causing the prevailing party in the lawsuit to expend extra effort and expense to pursue the fraudulently transferred property.
No, Revocable Trusts Do Not Protect Your Property from Lawsuits
Another very common misconception is that if you create a revocable living trust for estate planning purposes, you have also protected your assets from lawsuits and creditors. Unfortunately, this is simply not the case. While it is possible to design a revocable living trust that will protect your assets after you have died from the creditors and lawsuits of your named beneficiaries of your trust (usually your loved ones), revocable trusts in general offer no protection against your own creditors or lawsuits filed against you. This is because you have complete control over the property placed in your revocable trust. And because you retain the power to revoke the trust, a judge can order you to revoke the trust and use the trust property to pay your creditors and lawsuit judgements.
That being said, there are certain types of irrevocable trusts and other asset protection strategies that, if designed properly, can greatly enhance the level of protection you can obtain for your property. However, you should explore these with the assistance of an experienced asset protection and estate planning attorney to ensure proper creation and implementation.
When it comes to protecting your accounts and property, the time for taking the necessary steps is well before an accident occurs. Doing so will help you maximize the amount of asset protection that is available to you through purchasing insurance or designing estate planning features that have a much better chance of warding off successful lawsuits in the event of an accident.
We hope that we have given you some things to consider and encouraged you to revisit some aspects of your estate planning. Protecting your hard-earned accounts and property is a worthwhile investment of time and effort. But remember, the time to do so is before an accident occurs. If you are not sure where to start, give us a call. We would be happy to help you take the next step in preparing for the perils that winter can bring.
[1] To date, twenty-four states have enacted or introduced model legislation referred to as the Uniform Voidable Transactions Act (Formerly Uniform Fraudulent Transfer Act). The full text is available on the website of the Uniform Law Commission at https://www.uniformlaws.org/committees/community-home?CommunityKey=64ee1ccc-a3ae-4a5e-a18f-a5ba8206bf49.
Law Offices of Kimberly Lessing, APLC • 4740 Green River Road, Suite 117-H • Corona, CA 92880 • (951) 279-6626