How should I plan to protect my husband and his assets from myself?
November 15, 2014 11:28 PM   Subscribe

To start with, I know that this is something that will need to be discussed with a lawyer when the time is right and it will vary according to our local laws. But this is a general question, I'm looking for general information and answers (not legal advice!) about what sort of things may be necessary in the future to protect my husband.

Husband and I have been married for five years, no assets, and a medium sized chunk of student debt. We live in the United States. We don't have children, nor do we plan to at this time. I will be graduating soon and starting my career some time next year. Husband is an academic with very good eventual prospects (in a very 'hot' field) who will be finishing his phd in 2016 and will likely land a job after completing his first postdoc.

Compared to the average person, I am **very** likely to be the target of a lawsuit, due solely to my chosen career track. It's a relatively small niche, and people in my sector do not typically carry malpractice insurance, since it is either prohibitively expensive, or not available, depending on the state. People in my field also don't really make a ton of money, and any assets my husband and I may eventually have will likely be chiefly from his work.

I plan to do everything reasonable to prevent a lawsuit from ever occurring in the first place, but of course, you never know what can happen. Given that we are years away from having any real assets, and I don't even know where we are going to live (due to nature of academic job market), consulting a lawyer right now makes no sense.

What I care about is that I don't ever want any money my husband makes to be subject to a judgement that I incur. Is it possible to protect him from myself in this way? What type of general advice, legal structures, or things do people in my situation typically consider?

I honestly don't care about owning things or being on the title to possessions. Also please assume that we will be married forever and I don't need to protect myself for a possible divorce, because that will never happen.
posted by anonymous to Law & Government (22 answers total) 6 users marked this as a favorite
Are you self-employed? And isn't this what LLCs are for?
posted by Beti at 11:32 PM on November 15, 2014 [6 favorites]

Welcome to the wonderful world of accounting for everything! And I mean literal accounting. You guys are going to start needing to keep seperate sets of books and keep completely separate bank accounts at the minimum.

And, you're wrong, consulting a lawyer right now is the only thing that makes sense. What you're asking for really depends on the law state to state. Chances are, because most states are, you're in a community property state. You want out of the community property rules.

Depending on where you are this will require some or all of the following.

1) A post-nuptial agreement to opt out of community property.
2) Separate banks accounts. Maybe a joint bank account you both put operating expenses in on a "as needed" basis. But you want to keep that account as close to zero as you can.
3) To put the big ticket items in your husbands name only (Which will be hard if you guys already cosigned on mortgage together. And forget about combining your income for purposes of getting a bigger mortgage if you haven't).
4) Rental agreements to pay for your living in your guys house, if your husband has a mortgage.
5) Accounting programs that track where money comes in to your guy's bank accounts, where it comes out.
6) Wills and trusts to make sure that, if your husband dies, his assets won't completely devolve to you in such a way that creditors can go after them. (Commonly refereed too as Spendthrift Trusts)

And, again, you can't do this without a lawyer. Hell, you really can't do it without a team of professions, at least a trust and estates attorney, a family law attorney, an accountant, and probably a tax lawyer on top of that.

You can try to do it without that, but it's almost guaranteed not to work. When setting up similar things for people in the past I knew they wouldn't hold up to a sustained attack, not because I was doing anything incorrectly, but because I was nearly certain that my clients wouldn't follow through on the accounting, ledgers, and maintenance needed to make a plan like this work.

I know you want a cheap and easy answer. There is no such thing. People who claim there is are selling snake oil. And there's plenty of snake oil out there.
posted by bswinburn at 11:54 PM on November 15, 2014 [9 favorites]

There are other kinds of insurance besides professional malpractice insurance. The high net worth individuals I know carry personal liability insurance separate from homeowner's, car, malpractice, business liability, etc policies. There are brokers who specialize in these special insurance needs.

I think if you can't afford a lawyer or insurance you should rethink your chosen field, or recalibrate your definition of "affordable." Ask around your professional community -- not just professors -- to find out how other people manage, and who the most recommended attorneys and brokers are.
posted by stowaway at 4:20 AM on November 16, 2014 [5 favorites]

Chances are, because most states are, you're in a community property state.

Actually, only nine states are community property states, and all of them except Wisconsin are in the west and southwest.
posted by slkinsey at 6:03 AM on November 16, 2014 [1 favorite]

One point is that only the defendant, and not her spouse, can be held liable for her actions.

Another is that, in many states, the home owned by husband and wife is not an asset that can be subject to levy by a judgment creditor of one of them.

The time to talk to a lawyer is now, before any issue arises. Planning in advance is generally better than cleaning up after a mess occurs.
posted by megatherium at 6:41 AM on November 16, 2014 [2 favorites]

How do others in your profession limit risk and liability? That's what you do.

Almost certainly you should incorporate your practice. I find it very hard to believe that any profession that is routinely exposed to litigation does not have a system for practitioners to insure themselves. And if you can't afford the insurance, then you can't afford to practice on your own. Be real.
posted by spitbull at 8:03 AM on November 16, 2014 [7 favorites]

Because by the way how does not limiting your exposure to personal or practice liability also not represent economic risk to your family, meaning your husband? Your career is a marital asset too.
posted by spitbull at 8:05 AM on November 16, 2014 [1 favorite]

Please do not take legal advice from the internet.

While some of the issues you're dealing with are state-specific, you can certainly begin to educate yourself with the help of attorneys familiar with your field.

Do not begin by taking legal advice from the internet.
posted by freshwater at 9:09 AM on November 16, 2014 [4 favorites]

people in my sector do not typically carry malpractice insurance, since it is either prohibitively expensive, or not available, depending on the state. People in my field also don't really make a ton of money

If you are entering a profession where there is a high likelihood that your work will lead to the type of harm to others that results in them filing lawsuits, yet people in your profession opt out of insuring themselves -- or, per state law, are unable to be insured -- you are choosing to be in a line of work that is founded at least partially on hinky ethics. And you are choosing to dodge responsibility by not finding a way to be insured -- by practicing in a state that allows for it, AND by finding a way to fund that insurance.

The best way to insure that your husband doesn't get caught in the line of fire is to reconfigure your career so that you do the right thing -- either insure yourself appropriately (and have a good legal representative lined up), or to shift your skillset to a profession that is aboveboard, ethical, and insurable.

You say we should assume you will never get a divorce; I would suggest that the issues of ethics and liability will put a burden on your marriage that will take its toll one way or the other, and fundamentally undermines your chances of that union being lifelong. It's a hugely stressful way to live. You'll constantly be looking over your shoulder, or waiting for the other shoe to drop; and even if you do have good lawyers on your side, the process of going through litigation is soul-crushing, and could easily shatter the most seemingly rock-solid marriage. You are putting your partner in harm's way, unnecessarily -- for what, a few lousy bucks? Some sense of specialness (the "niche" factor)? Why? There are many, many professions out there that you could take up that wouldn't put you in this predicament.
posted by nacho fries at 9:22 AM on November 16, 2014 [21 favorites]

Yeah, I'm with nacho fries: I'm trying really hard to imagine a profession where practitioners are routinely exposed to malpractice litigation but can't even be insured in some states. I'm thinking it's some kind of "alternative" medical practice, perhaps?

If you can't practice it without risking personal liability, it's not really a "profession" at all, almost by definition.
posted by spitbull at 9:29 AM on November 16, 2014 [6 favorites]

I don't really have legal advice but I would like to echo what nacho fries said. I have been involved in a lawsuit to do with my daughter's death. We dropped it because she was dead. Had she lived, she would have needed millions of dollars for lifelong, 24 hour care. I was very glad we were suing a hospital and not (as some of the women I have met in similar positions) a lay midwife in the US.

If you are in a field where there are damages often enough to be worrying about this up front, and your plan is focused on preserving your husband's assets over being able to make restitution in the event if damages, you cannot be in business. A rational business that involves liability -- this is not some unforeseen consequence if you are seeing it now -- has a model to fund that liability.
posted by warriorqueen at 9:32 AM on November 16, 2014 [14 favorites]

Warriorqueen is right on. It's not just your husband's resources you need to think about. A professional's liability for mistakes or unforeseen complications is an obligation (including a financial one to pay for those consequences you cause) to your clients.
posted by spitbull at 9:38 AM on November 16, 2014 [2 favorites]

I came back and reread my answer because I was thinking I didn't answer your question to preserve your husband's assets from yourself. So just to expand a bit where I got terse at the end...the best way to protect your husband, your marriage, and you is to not participate in a field where people are clearly aware there is a problem and are not fixing it, with insurance, i.e. cash.

My daughter's brain damage was a 1:1000 event mismanaged to 1:10,000 consequences...but it was all very human error. Regular good people on the day the holes in the Swiss cheese lined up. But they did make errors. The consequence was so terrible. Nothing would have helped my daughter long term but enough people to suction her saliva, turn her for bedsores, feed her, wash her...this is what that kind of possibility is. I would have pursued that legally to the ends of the earth if it had been for that.

If your field has that kind of potential I really think that the truly best answer to your question is find a way to have insurance. I am not scolding you but I am sharing what in that kind of situation liability is. It is not a game of chess.
posted by warriorqueen at 10:04 AM on November 16, 2014 [8 favorites]

What type of general advice, legal structures, or things do people in my situation typically consider?

My general advice is that what you are attempting to do is anti-social, cruel, and contrary to the public good.

If you are liable for something, that means you've injured someone in some way. If you are shielding your assets to avoid being able to compensate for that injury, then that means you are injuring someone without the ability to compensate them for that injury. If you were able to compensate them, you wouldn't have to shield your assets as you are asking.

Your question is morally equivalent to, "I might attack someone in public, but I don't want to go to jail for it. What do I do?". The answer to that question and this question is, "don't do what you want to do." Your actions have consequences, and if the potential consequences are legal liability, that means you've potentially hurt someone.

Don't hurt people without the ability to compensate them for the injury you caused.
posted by saeculorum at 10:36 AM on November 16, 2014 [10 favorites]

On the suspicion that this is in fact about lay midwifery, which is about the only (semi-, in my opinion) legitimate field of practice where practitioners do risk great whopping liability and yet some do go without insurance (and 35% get sued at some point in their careers), because their clients are often naive, I found this excellent article "Why There Is No Excuse for Midwives to Work Without Insurance." It is very straight up and clear, and it's on a pro-NCB blog. It debunks the myth that insurance costs too much or is hard to get.

Even if you're not a midwife, the arguments it makes echo what folks are saying here. You don't have insurance? You're not a professional, and no client should trust you with their (or their child's) health.
posted by spitbull at 12:20 PM on November 16, 2014 [7 favorites]

I also note the irony of your last sentence. Of course you hope bad things will never happen. But they do. To good people. You cannot be certain you will never make a mistake or that someone else won't change over time. It amounts to magical thinking to avoid taking prudent precautions against events that, while seemingly unlikely, actually happen to large numbers of people. It isn't the risk of getting sued that's the problem. It isnt the risk of exposing your husband's share of your family assets to judgement. It's the risk you might actually harm someone materially just doing your job, and if that weren't an onerous and serious risk a) insurance would not be "prohibitively expensive" (that is designed precisely to prohibit higher risk practices, in fact) and b) you wouldn't be pre-terrified of family liability.

Yor plumber and mechanic and landscaper carry liability insurance. It's not an option in many forms of business.
posted by spitbull at 1:38 PM on November 16, 2014 [2 favorites]

"What type of general advice, legal structures, or things do people in my situation typically consider?"

Malpractice insurance. This is literally what malpractice insurance is for. If it's too expensive, your "profession" is too risky. If your question is, "How can I replicate malpractice insurance without having to pay for malpractice insurance?" it's a dumb question. Pony up like a responsible adult professional or choose a different field.

You can't know how or even whether it is possible to separate and protect your spouse's assets from your lawsuits until you know what state you're living and practicing in.

Malpractice insurance doesn't just pay for the settlement or payout to the injured client -- it pays for your lawyer, too. When one of these lawsuits is filed against you, and you have no assets, what is your plan to pay an attorney for the five years of the lawsuit? Do you imagine you'll just show up in court, admit culpability, and smugly say, "I have no assets so you can't make me pay this judgment"? Because courts don't find that amusing at all. Or do you imagine you'll show up in court and defend yourself? Or are you just hoping your clients will be too poor to be able to afford to sue you?

Among the possible outcomes (highly dependent upon the state and the profession, of course) are that you have to get divorced to protect your spouse's assets; that you have a judgment against you so large that you declare bankruptcy; that you are in a state that does not allow you to discharge certain types of malpractice debts in bankruptcy and it never goes away; that you lose your license for failure to pay malpractice judgments and are no longer allowed to practice your profession*; or that you end up in jail for fraudulently shielding assets during bankruptcy. So, you know, whatever you decide to do, don't screw it up, because you'll be asserting a lot of these things under penalty of perjury. It's not really a self-representation situation in court.

*Of course, it sounds like your "profession" isn't licensed in several states anyway, which is why insurance isn't available in them, and is extremely high-risk, which leads me to believe it's illegal in those states, so you may end up in jail before the bankruptcy part, which ... I can't tell whether you'd consider that a better or worse outcome.

None of this is a good life plan. If you can't afford insurance, you can't afford your job, unless you're on some sort of Jack Kevorkian-esque crusade to change the world by going to jail a lot. Crusading for a cause you believe in is fine, but be realistic; you can't both crusade AND protect your family from all repercussions of your crusade.
posted by Eyebrows McGee at 1:56 PM on November 16, 2014 [8 favorites]

Standard practice for doctors, for example, is to put assets in the name of the non-practicing spouse.
posted by jpe at 2:29 PM on November 16, 2014

Standard practice for lawyers is to unwind asset protection schemes in high dollar litigation.
posted by spitbull at 3:04 PM on November 16, 2014 [4 favorites]

I'm looking for general information and answers (not legal advice!) about what sort of things may be necessary in the future to protect my husband.

A lot of folks have already given some very good suggestions about investigating establishing a LLC; discovering what it takes to incorporate a business; establishing and maintaining meticulous, separate accounting and tax practices; investigating business insurance and umbrella homeowner insurance policies (as you start to accumulate assets), etc.

But since you still appear to be in the planning stages of your career, I want to suggest that you also investigate alternate business models that will increase your income and/or reduce your potential liability. Speaking as someone who knows a lot of small business owners and who has had their own small business, it really is the case that if your business model cannot pay for you to acquire and maintain the appropriate professional insurance and licensure your profession requires (e.g. continuing education credits, clinical hours, periodic exams) then you do not have a business, you have a hobby.

Since you don't offer specifics about your field, I can only offer general ideas for other business models, but, for example in the arts, practicing fine artists will often teach classes, write for grants, do repairs, publish articles/books, give online workshops and tutorials, in addition to doing custom work or their own personal art. Ditto for musicians. Alternative health practitioners can often do the same sorts of activities, and can sometimes work from a spa or medical clinic and depending upon what they practice and where, they may get some kinds of reduced liability coverage that way.

Looking into other business models may help you discover strategies so you can make enough money to pay for malpractice insurance, reduce your exposure to risk, or uncover an alternative way of getting access to a pool of coverage via a larger practice (can several of your colleagues incorporated into a group practice, for instance?) or parent organization.

Good luck, and most definitely get a lawyer and an accountant on the specifics as soon as you know where you'll be.
posted by skye.dancer at 3:07 PM on November 16, 2014

You could also look into establishing a Family Trust for assets you want to protect. Rich people do that, and leave a minimal amount of money in their names, for the purpose of making inheritance and philanthropic gifting easier, but it also protects against litigation, since the money/house/whatever belongs to the trust, and not to you personally.
posted by nadise at 3:16 PM on November 16, 2014

Get an attorney. Seriously, get an attorney. Get an attorney. Oh, did I mention that you should get an attorney? Seriously though, there are numerous ways to shield assets from potential judgments against you, you need a competent attorney to help you utilize the best methods in your jurisdiction. Good luck!
posted by gibbsjd77 at 1:45 PM on November 19, 2014

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