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How to protect your assets after a car accident

Take these essential steps to protect your assets after a car accident, from the first moments to long-term strategies.

Written by

Meagan Faryna

12 September 2024

Media inquiries: [email protected]

Car accidents can happen in the blink of an eye, but their financial implications can be staggering and long-lasting.

According to the National Safety Council, the economic cost of a motor vehicle death in 2022 averaged $1.8 million, while a disabling injury averaged $162,000.

These figures underscore why, whether you're at fault or not, a serious accident can put your assets at risk, potentially jeopardizing your financial stability and future.

This guide will walk you through the essential steps to protect your assets after a car accident, from the first moments to long-term strategies.

Why do you need to protect your assets after a car accident?

Asset protection is safeguarding your wealth and property from potential creditors or legal claims. After a car accident, this becomes particularly important as you may face:

Lawsuits from other parties involved in the accident
Medical bills exceeding your insurance coverage
Loss of income due to injuries
Potential judgment liens on your property

Remember, asset protection is not about hiding assets or evading responsibility. It’s about using legal strategies to shield your hard-earned wealth from excessive claims or unfair losses.

A step-by-step guide on how to protect your assets after a car accident

The first 30 minutes

The moments immediately following an accident are critical, not just for everyone's safety but also for protecting your assets. Here's what you need to do:

Make sure everyone is safe: Check for injuries and call emergency services if needed. If possible, move to a safe area to prevent further damage or injuries.
Document the accident scene: Take photos of all vehicles involved, including license plates. Capture images of the surrounding area and any property damage. Record names and contact information of witnesses.
Obtain official documentation: Call the police to file an official report. Request a copy of the police report or incident number for your records.
Protect your legal interests: Avoid admitting fault or apologizing. Stick to factual information when speaking to others involved because here’s how that could go down. Let’s say Sarah, feeling guilty after a minor fender bender, immediately apologized and said, "I should have been paying more attention." This statement could later used against her in court, making it harder for her to claim she’s not at fault.

Within 24 hours

The day after the accident is critical for setting up your asset protection strategy. Be sure to:

Notify your insurance company: Provide factual information about the incident. Understand your policy's reporting requirements and deadlines.
Seek medical evaluation: You might feel fine immediately after an accident, but some injuries, like whiplash, can take days to manifest. If you skip the doctor's visit and develop symptoms later, you might face challenges linking these injuries to the accident, potentially complicating your insurance claim or lawsuit.
Start building your case file: Begin a detailed record, including photos, witness information, and personal notes about the incident. Keep all receipts for expenses related to the accident.

Within the first week

As the dust begins to settle, it's time to take a more comprehensive approach to asset protection:

Review your insurance coverage: Examine your policy limits for liability, collision, and comprehensive coverage. Look for gaps that could leave your assets exposed. Suppose you’re involved in an accident where the other driver is seriously injured. You discover your liability coverage is only $50,000, but the medical bills exceed $200,000. This gap could put your personal assets at risk.
Manage your insurance claim: Follow up on your initial claim regularly. Document all communications with the insurance company.
Seek legal advice: Get in touch with a lawyer knowledgeable in both car accidents and asset protection. Discuss strategies to shield your assets from potential lawsuits.
Identify vulnerable assets: Create a comprehensive inventory of your assets, including real estate, vehicles, financial accounts, investments, business assets, personal property, and future income potential. This helps you understand the full scope of what could potentially be at risk in a lawsuit resulting from the accident. By identifying all your assets and their current protections, you can work with your attorney to develop appropriate strategies for navigating the legal process and plan for better asset protection in the future.

The first month and beyond

As you move forward, continue to protect your assets with these steps:

Document financial impact

Keep a detailed record of all accident-related expenses
Gather repair estimates and receipts for accident-related costs
Calculate any lost wages due to the accident
Track ongoing medical expenses and treatments

2. Begin asset protection planning

Work with your attorney to develop a comprehensive strategy
Start implementing measures to protect vulnerable assets
Consider both immediate actions and long-term protection measures

3. Monitor your credit and financial accounts

Check your credit report for any unexpected changes
Keep an eye on your bank accounts and investments for unusual activity
Be alert for signs of identity theft, which can sometimes occur after accidents

4. Reassess your insurance needs

Review your current coverage in light of the accident
Consider increasing limits or adding additional types of coverage
Explore options for umbrella insurance if you don't already have it

5. Plan for potential long-term impacts

Consider the possibility of ongoing medical needs or disability
Explore options for protecting your future earning capacity
Discuss potential career impacts with your employer or financial advisor

How to safeguard your assets before an accident

True asset protection begins before you even get behind the wheel. Consider implementing these key preventive measures to fortify your assets before you find yourself in a car accident.

Strategic asset and vehicle titling

How you title your assets, including vehicles, can significantly impact your liability and asset protection.

For example, transferring a car title to your adult child can limit your personal exposure, while options like "tenancy by the entirety" for married couples in some states can shield joint assets from individual creditors.

However, titling laws vary by state and situation. Consult with a local attorney to understand the best titling strategies for your specific circumstances and to maximize protection under your state's laws.

Umbrella liability insurance

An umbrella liability insurance policy can provide an extra layer of protection beyond your standard auto insurance. This additional coverage can potentially safeguard your assets in case of a significant lawsuit resulting from an accident.

As an example, let’s say you're found at fault in a serious accident with damages of $750,000. Your auto insurance covers $300,000, but you have a $1 million umbrella policy. This additional coverage protects your savings and home from being used to pay the remaining $450,000 in damages.

While it represents an additional cost, the peace of mind and potential financial protection it offers can be invaluable. Discuss with your insurance agent the appropriate amount of coverage based on your assets and potential risks.

Know state-specific laws

Asset protection laws can vary significantly from state to state.

For instance, some states like Florida have strong homestead exemptions that protect the value of your primary residence from creditors. Others may have unique insurance requirements, such as no-fault insurance systems.

Familiarize yourself with your state's specific laws regarding asset protection, insurance requirements, and liability. This knowledge can be crucial in developing an effective asset protection strategy tailored to your location.

Regular protection reviews

As your financial situation evolves, so should your protection strategy. Schedule regular reviews with your attorney and financial advisor to ensure your assets remain well-protected.

These professionals can help you adjust your strategy in response to changes in your financial situation, shifts in the legal landscape, or new protection options that become available.

Aim for an annual review at minimum and more frequently if you experience significant life changes or financial shifts.

FAQ

Can I transfer my assets to someone else after an accident to protect them?

Transferring assets after an accident with the intent to avoid potential liability is generally considered fraudulent and can have serious legal consequences. You should maintain proper documentation and work within the legal system rather than attempting to hide assets.

Will my retirement accounts be at risk if I'm sued after a car accident?

In many cases, qualified retirement accounts like 401(k)s and IRAs have strong protections under federal law. However, the level of protection can vary based on the type of account and your state's laws. Consult with a financial advisor or attorney for specific guidance.

How long after an accident can someone sue me?

The statute of limitations for car accident lawsuits varies by state, typically ranging from 2 to 3 years. However, there can be exceptions, so it's important to maintain your records and stay prepared even after the immediate aftermath of an accident.

How does filing for bankruptcy affect a car accident lawsuit against me?

Bankruptcy can pause a lawsuit and may discharge some debts resulting from a car accident. However, debts arising from willful or malicious injuries typically cannot be discharged. Bankruptcy is a complex process with long-lasting consequences, so consult with a bankruptcy attorney before considering this option.