How a Fender Bender can impact your finances and Estate Plan

In the chilling words of several George R. R. Martin’s Game of Thrones characters, “Winter is coming.”

And winter is certainly here and with that comes a change in driving conditions in much of North America—slippery roads, ice, snow, diffused sunlight during the morning and evening commutes, and a variety of other hazards. Unfortunately, with an increase in such risks comes an increase in the likelihood of being involved in a car accident. But far too few of us have given much thought to what steps should be taken if they are actually involved in a fender bender.

How Car Accidents Can Impact your Estate Plan.

Healthcare decision-making. In the event of an accident where you become unable to speak or make decisions for yourself due to 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 validly executed medical power of attorney will allow someone you have chosen previously (a 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 delay receiving certain types of medical treatment. Thus, it is important to 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 in the event you need to be rushed to a hospital.

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 could place their savings and property at risk of loss. Ensuring you carry adequate insurance is one of the simplest ways you can help ward off risk of loss. Beyond increasing your insurance limits, you may also want to discuss whether it would make sense to purchase an umbrella insurance policy. With both policies in place, you can create a large enough pool of funds to settle most claims without jeopardizing your own assets.

Personal Injury Settlements. In some cases, a personal injury settlement may be paid to you in a lump sum. If you have received such a settlement, it is important to review investment options that will protect the funds. These funds should be invested in a manner that will ensure they are available to you to provide for your needs, particularly when your needs have increased as a result of injuries sustained in the accident.

Be Careful of Fraudulent Transfers. Where there are significant property damages and medical injuries, you may be tempted to take steps to protect what you own if you fear a lawsuit may result from the accident. It is important to resist the temptation to begin transferring or retitling property and accounts to friends or family to hide what you own to protect it from creditors. In most states, taking such steps after an accident has occurred in which you are liable is considered to be a fraudulent or voidable 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 seize that property.

No, Revocable Trusts Do Not Protect your Property from Personal Lawsuits. A very common misconception is that if you create a revocable living trust, you have 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 die from creditors and lawsuits against the beneficiaries of the trust, revocable trusts offer no protection against your own creditors or lawsuits filed against you. This is because you have complete control over the property placed in the names of the Trustees of 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 creditors and lawsuit judgments.

When it comes to protecting your accounts and property, the time for taking the necessary steps is well before an accident ever occurs. Doing so will help you maximize the amount of asset protection available through purchasing insurance or designing estate planning features that have a better chance of thwarting claims in the event of an accident or other misfortune.

[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

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