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Protection of your estate from liabilities

Master Account • Apr 16, 2024

Many of our clients look for advice regarding the structure of their estate plans, which is certainly a worthy goal; however, many clients fail to recognize the importance of protecting their assets from liabilities, especially unforeseen creditors. This article will focus on some basic strategies to consider as a part of your overall estate planning.


There are many unforeseen liabilities in life. For example, personal liability associated with the ownership and operation of a business is a significant risk. In the event a business venture suffers loss, or worse yet, a customer is injured while doing business on your premises, personal liability can result as a result of such event. One way to protect your personal assets from business-related liabilities is to have your business set up as a separate legal entity. The most popular entities are the limited liability company (LLC) and business corporation. Both of these entities help shield your personal assets from business liabilities. Please note that in order to have such protection, the entity must be properly set up and maintained as a separate legal entity. Paying personal bills directly from your LLC or corporation jeopardizes the liability protection. There may also be tax benefits from having your business incorporated or set up as an LLC that you should discuss with your accountant. As a planning tool, we often recommend that our clients who own rental property or businesses have said businesses set up as a LLC or corporation. However, we also suggest that the business maintain appropriate business liability coverage, which offers additional protection from claims.


Another liability that many people overlook (or assume they have adequately covered), is personal liability associated with a home(s) and automobile(s). Most people do not maintain enough liability insurance on their home and automobile. The minimum automobile liability coverage in Arkansas is approximately $50,000, which will not begin to cover the actual costs of a serious accident. If your insurance coverage is inadequate, then personal liability may result. For this reason, we encourage our clients to increase their liability coverage on their home and automobiles to insure against this significant risk. In addition to increasing your liability coverage, we also recommend that our clients consider obtaining a separate policy for personal liability known as an “umbrella” liability policy. In essence, an umbrella policy offers additional personal liability protection over and above the liability protection that you may already have on your automobiles and home. Such policies are available at reasonable costs. We encourage our clients to discuss an umbrella policy with their insurance agent as a part of a comprehensive estate plan.


A comprehensive estate plan should factor in many things, and in particular, personal liability protection. People work hard to accumulate assets and to have such assets subject to liability unnecessarily must be avoided. The use of business entities such as LLCs and corporations are a good planning option that should be considered. Additionally, setting higher liability limits and obtaining an umbrella personal liability policy are key components to insure against such liabilities. A comprehensive estate plan should include these goals so as to protect assets for the benefit of one’s family.


Wesley Harris is an associate attorney at Farrar & Williams, PLLC, a law firm limiting its practice to trusts, estate planning, and elder law, located at 1720 Higdon Ferry Road, Suite 202, Hot Springs, Arkansas, and can be reached at 501-525-4401 or by email at wesley@farrarwilliams.com. Wesley can answer any questions you have about this subject.

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