Client Story: Protection from Lawsuits

Wes Gate is a California real estate attorney in his early 60’s and was about two years away from retirement.  He mishandled a client’s case (on a large deal) and was sued by the client for malpractice. Further review showed that he had made the same irreparable mistake with about 30 client cases over the years of his practice.  

This repeated mistake opened him up to over $150 million in liability. With only $1 million of malpractice coverage, Wes’ retirement funds, his house and other family assets were at risk.

Wes came to us and we were able to provide a creative strategy to prevent potential financial ruin. We converted his IRAs into 401k plans, which are exempt from creditor claims under federal law; and we transferred his home to a personal residence trust while having Wes borrow out all the available equity. The borrowed funds went into an offshore structure. Wes successfully kept all his assets safe from creditor claims.

We see many professionals – attorneys, accountants, investment advisors – who believe that having some form of errors and omissions insurance protects them from anything that may happen. It does, in most cases, but not always. Some cases are outliers, and the liability is either exceptionally significant and beyond insurance limits, or, due to its nature, not covered by insurance.

We advise our clients to carry significant insurance coverage, including an umbrella policy, and bootstrap it with an asset protection structure.