"Asset Protection" for young teenage driver in the household

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mathwhiz
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"Asset Protection" for young teenage driver in the household

Post by mathwhiz »

Our son is approaching the age when he can apply for his learners permit and we are very concerned about protecting our assets if he gets into an at fault accident.

So the basics is we have a lot of money in "protected" assets from creditors and Florida is a very friendly state for asset preservation from lawsuits. Our ROTH's, 401k's, pensions, Homestead property. All protected and untouchable from my understanding.

That still leaves a 7 figure taxable portfolio that is a target. I could jack up the umbrella to millions but that won't stop an attorney from suing for everything if our son does something abominably stupid like kill someone drinking and driving. The premiums would also be very expensive.

So I'm interested in more advanced asset preservation options such as trusts and other structures that make these assets airtight from potential creditors.

Anyone have this experience and have suggestions?
BF3000
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Re: "Asset Protection" for young teenage driver in the household

Post by BF3000 »

My daughter just got learner’s permit. I am an atty, but I use an estate atty because that area is not my specialty.

I believe that a trust has to be irrevocable before solid creditor protection is established. Still might not be bullet proof. Most people want to be able to change it.

Umbrella insurance isn’t expensive. Have you priced it? I have a $3M policy and don’t sweat it, and I am pretty frugal. If you have much more dough, then all the more reason you can afford it. I think umbrella policy should always cover unprotected taxable assets. I know you didn’t want such advice, but I think you are making a mistake.

For what it is worth, I designated my trust as an additional insured on my policy.
NotWhoYouThink
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Re: "Asset Protection" for young teenage driver in the household

Post by NotWhoYouThink »

It isn't just your son that could kill someone with your car, you and your spouse could kill a busload of neurosurgeons through just a moment of inattention. So don't pin your worries on your son, protect yourselves anyway.

You say you have umbrella insurance. Good, that's probably what you need, says me who isn't an attorney. But dozens of threads on this subject on this board have failed to provide even anecdotal evidence of multi-million dollar awards for simple auto accidents. When you buy umbrella insurance you are buying the legal defense services of lawyers who have a financial interest in protecting against huge awards. $1M is probably enough, but in case of tort inflation go for $2M if it makes you feel better.
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gwe67
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Re: "Asset Protection" for young teenage driver in the household

Post by gwe67 »

BF3000 wrote: Thu Sep 02, 2021 7:59 pm My daughter just got learner’s permit. I am an atty, but I use an estate atty because that area is not my specialty.

I believe that a trust has to be irrevocable before solid creditor protection is established. Still might not be bullet proof. Most people want to be able to change it.

Umbrella insurance isn’t expensive. Have you priced it? I have a $3M policy and don’t sweat it, and I am pretty frugal. If you have much more dough, then all the more reason you can afford it. I think umbrella policy should always cover unprotected taxable assets. I know you didn’t want such advice, but I think you are making a mistake.

For what it is worth, I designated my trust as an additional insured on my policy.
My kid had a $900 fender bender and my insurance carrier dropped my umbrella.
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mhalley
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Re: "Asset Protection" for young teenage driver in the household

Post by mhalley »

Umbrella insurance is the best bet. Trusts etc are overkill for protecting assets for the few years your son will be your financial responsibility.
oldfort
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Re: "Asset Protection" for young teenage driver in the household

Post by oldfort »

Why not increase your umbrella limits? Whatever it costs, it has to be an order of magnitude cheaper than hiring a lawyer to create an offshore trust or DAPT, paying a corporate trustee to manage the trust for the rest of your life and whatever drag comes from the corporate trustee making sub-optimal or high cost investments.
Topic Author
mathwhiz
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Re: "Asset Protection" for young teenage driver in the household

Post by mathwhiz »

I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver? Does 3 x taxable assets in the umbrella enough to keep the ambulance chaser types at bay? How much umbrella is enough? My agent tells me premiums would be in the thousands with a teenage driver but probably much cheaper than the trust structure you describe for sure.
oldfort wrote: Thu Sep 02, 2021 8:08 pm Why not increase your umbrella limits? Whatever it costs, it has to be an order of magnitude cheaper than hiring a lawyer to create an offshore trust or DAPT, paying a corporate trustee to manage the trust for the rest of your life and whatever drag comes from the corporate trustee making sub-optimal or high cost investments.
NYCaviator
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Re: "Asset Protection" for young teenage driver in the household

Post by NYCaviator »

Umbrella insurance is the way to go. You can get up to $100m through some carriers. Even the most complicated (legal) asset protection schemes aren't bulletproof. Just make sure to teach your kids to be responsible, no drinking/texting and driving.
KlangFool
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Re: "Asset Protection" for young teenage driver in the household

Post by KlangFool »

mathwhiz wrote: Thu Sep 02, 2021 8:16 pm I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver?
mathwhiz,

It protects you too. When you are rich enough, you are a target for lawsuit.

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Brianmcg321
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Re: "Asset Protection" for young teenage driver in the household

Post by Brianmcg321 »

That's why you give your kid a beater to drive. A faded out 10 yr old civic will do. Then if they are in an accident, and you come to the scene to pick them up, be sure to drive the crummiest car you can. And wear an old worn out t-shirt with holes. Borrow a friends farm truck or their kids beater.
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HereToLearn
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Re: "Asset Protection" for young teenage driver in the household

Post by HereToLearn »

mathwhiz wrote: Thu Sep 02, 2021 8:16 pm I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver? Does 3 x taxable assets in the umbrella enough to keep the ambulance chaser types at bay? How much umbrella is enough? My agent tells me premiums would be in the thousands with a teenage driver but probably much cheaper than the trust structure you describe for sure.
oldfort wrote: Thu Sep 02, 2021 8:08 pm Why not increase your umbrella limits? Whatever it costs, it has to be an order of magnitude cheaper than hiring a lawyer to create an offshore trust or DAPT, paying a corporate trustee to manage the trust for the rest of your life and whatever drag comes from the corporate trustee making sub-optimal or high cost investments.
You might want to check with a different agent, or perhaps rates vary massively by location. I pay $623/year for $5 million of coverage with my HO carrier. I have my car insurance with a separate carrier, and the rates were much higher when I quoted umbrella with them. My boys are 22 & 24, and I have been paying the same annual premium for perhaps five years now.
an_asker
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Re: "Asset Protection" for young teenage driver in the household

Post by an_asker »

HereToLearn wrote: Thu Sep 02, 2021 8:25 pm
mathwhiz wrote: Thu Sep 02, 2021 8:16 pm I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver? Does 3 x taxable assets in the umbrella enough to keep the ambulance chaser types at bay? How much umbrella is enough? My agent tells me premiums would be in the thousands with a teenage driver but probably much cheaper than the trust structure you describe for sure.
oldfort wrote: Thu Sep 02, 2021 8:08 pm Why not increase your umbrella limits? Whatever it costs, it has to be an order of magnitude cheaper than hiring a lawyer to create an offshore trust or DAPT, paying a corporate trustee to manage the trust for the rest of your life and whatever drag comes from the corporate trustee making sub-optimal or high cost investments.
You might want to check with a different agent, or perhaps rates vary massively by location. I pay $623/year for $5 million of coverage with my HO carrier. I have my car insurance with a separate carrier, and the rates were much higher when I quoted umbrella with them. My boys are 22 & 24, and I have been paying the same annual premium for perhaps five years now.
Umbrellas (and other insurance as well) vary massively by location. :oops: As I've complained on this board a few times, when I priced it out, it was nearly $1,000 for a $1 million policy here in FL.
Topic Author
mathwhiz
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Re: "Asset Protection" for young teenage driver in the household

Post by mathwhiz »

Yes, the Florida insurance market is completely broken. Ridiculous amounts of fraud and staged accidents according to my agent. $1000 per million with a teenage driver sounds about right to what I was told. It's terrible. I did not get quotes from my home insurer but I'm scared that would give them reason to drop me. Getting decent homeowner's coverage because of hurricanes is another nightmare in Florida.
an_asker wrote: Thu Sep 02, 2021 8:29 pm
Umbrellas (and other insurance as well) vary massively by location. :oops: As I've complained on this board a few times, when I priced it out, it was nearly $1,000 for a $1 million policy here in FL.
HereToLearn
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Re: "Asset Protection" for young teenage driver in the household

Post by HereToLearn »

an_asker wrote: Thu Sep 02, 2021 8:29 pm
HereToLearn wrote: Thu Sep 02, 2021 8:25 pm
mathwhiz wrote: Thu Sep 02, 2021 8:16 pm I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver? Does 3 x taxable assets in the umbrella enough to keep the ambulance chaser types at bay? How much umbrella is enough? My agent tells me premiums would be in the thousands with a teenage driver but probably much cheaper than the trust structure you describe for sure.
oldfort wrote: Thu Sep 02, 2021 8:08 pm Why not increase your umbrella limits? Whatever it costs, it has to be an order of magnitude cheaper than hiring a lawyer to create an offshore trust or DAPT, paying a corporate trustee to manage the trust for the rest of your life and whatever drag comes from the corporate trustee making sub-optimal or high cost investments.
You might want to check with a different agent, or perhaps rates vary massively by location. I pay $623/year for $5 million of coverage with my HO carrier. I have my car insurance with a separate carrier, and the rates were much higher when I quoted umbrella with them. My boys are 22 & 24, and I have been paying the same annual premium for perhaps five years now.
Umbrellas (and other insurance as well) vary massively by location. :oops: As I've complained on this board a few times, when I priced it out, it was nearly $1,000 for a $1 million policy here in FL.
I guess I am glad I don't live in Florida then. Cannot imagine how much the auto insurance premiums would be. Bad enough insuring a 22 year old male.
BF3000
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Re: "Asset Protection" for young teenage driver in the household

Post by BF3000 »

OP, why pay 3x your taxable net worth for umbrella? I think you are overthinking this. Why not 1x? And it is not a complex strategy about hiring lawyers to drag out a lawsuit to keep sharks at bay. Suppose you goofed, swerved over the center line, and rendered a 5-year-old child a quadriplegic and killed his mom. Suing you for a lot of money would be a legitimate claim—not ambulance chasing—but the plaintiff would have no incentive to reject the policy limits if your accessible net wealth equaled your policy limits.
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mathwhiz
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Re: "Asset Protection" for young teenage driver in the household

Post by mathwhiz »

So if I have $3M in taxable and get $3M in umbrella, what's stopping from the insurance company tendering limits and the lawyer going onto the next target, i.e. me? Especially with a kid involved and a sympathetic jury, why not get the full $6 Million judgment or is the insurance company going to force the attorney to waive the right to sue me as part of the settlement?
BF3000 wrote: Thu Sep 02, 2021 8:47 pm OP, why pay 3x your taxable net worth for umbrella? I think you are overthinking this. Why not 1x? And it is not a complex strategy about hiring lawyers to drag out a lawsuit to keep sharks at bay. Suppose you goofed, swerved over the center line, and rendered a 5-year-old child a quadriplegic and killed his mom. Suing you for a lot of money would be a legitimate claim—not ambulance chasing—but the plaintiff would have no incentive to reject the policy limits if your accessible net wealth equaled your policy limits.
make_a_better_world
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Re: "Asset Protection" for young teenage driver in the household

Post by make_a_better_world »

I have always feared this scenario- the big unforeseen liability wiping you out. I have several liability insurance policies on property, vehicles, umbrella, etc with high limits.

I have two friends who are both successful personal injury attorneys in different firms and have discussed the issue with me and if what they’ve said is true generally, some of our fears may be exaggerated.

Let’s say it happens that there is a vehicle crash, medical malpractice, accident on property, whatever. Per my attorney friends- legally it is true that there is a mechanism to levy and lien and seize your personal assets after there is a judgement against you that exceed policy protections. In reality it is exceedingly rare to happen. Typically they go for the insurance policy and corporations with deep pockets only, they settle before trial 99% of the time, they can have any party in the lawsuit at least 1% responsible pay any amount of what’s owed (that might be state dependent), and neither of them have ever seized anyone’s personal assets. They said something like that would require a motive to specifically want to destroy someone or maybe if the person was incredibly wealthy/famous.

I’d be interested to see a poll of the forum and see how many people on this board in their lifetime have actually had to use personal assets to satisfy a liability judgement.

As for your case, I'd put the car in your child's name as soon as legally possible in your state with their own policy.
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scorcher31
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Re: "Asset Protection" for young teenage driver in the household

Post by scorcher31 »

My thought is once my child is 18 their car will be solely titled in their name and their insurance will be a separate policy just for them. I would assume that would protect the parents. Perhaps just allow them to drive with you when 17.
spammagnet
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Re: "Asset Protection" for young teenage driver in the household

Post by spammagnet »

scorcher31 wrote: Thu Sep 02, 2021 9:25 pm My thought is once my child is 18 their car will be solely titled in their name and their insurance will be a separate policy just for them. I would assume that would protect the parents. Perhaps just allow them to drive with you when 17.
My adult daughter has her own car and her own insurance. As an itinerant contractor, she uses our home address as her permanent address, to maintain her Florida residency. We both have GEICO and they matched her to our home because of the permanent address. Because she had a couple of minor accidents, GEICO planned to drop my umbrella insurance a couple of different times. They relented when we filed affidavits that she actually lives elsewhere but we had to do that at every renewal for a few years. We ultimately resolved it by her getting insurance from a different carrier.

My point is that, despite having their own car and own insurance, the umbrella underwriter may still consider your kids a liability.
mr_brightside
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Re: "Asset Protection" for young teenage driver in the household

Post by mr_brightside »

a couple of words since you asked:

as mentioned earlier -- get your kid a modest 4-dr sedan 4-cylinder. kids that age don't think the way you and I do : cost / benefit ... risk / reward... their brains aren't fully developed yet.

this is a horrible real-world tragedy that happened a couple years ago here in Tampa. two killed ... family destroyed -- kid sent to prison for 20+ years. kid was racing 100+ on a residential-type area. some blame should fall on Mom / Dad -- gave their son a Mustang to drive. super irony : Mom was an insurance company Exec...

https://www.tampabay.com/news/tampa/202 ... -sentence/


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Re: "Asset Protection" for young teenage driver in the household

Post by Jack FFR1846 »

Teenagers...especially boys will get tickets and will get in accidents. With both of my kids, they did and our umbrella company at renewal gave us the choice of not being renewed or excluding the kid. We excluded the kid. After the first year of driving, the accidents stopped for both of them. Our older one has received tickets and paid for a lawyer himself for every one of them, which has kept every ticket off of his record.
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galawdawg
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Re: "Asset Protection" for young teenage driver in the household

Post by galawdawg »

mathwhiz wrote: Thu Sep 02, 2021 8:52 pm So if I have $3M in taxable and get $3M in umbrella, what's stopping from the insurance company tendering limits and the lawyer going onto the next target, i.e. me? Especially with a kid involved and a sympathetic jury, why not get the full $6 Million judgment or is the insurance company going to force the attorney to waive the right to sue me as part of the settlement?
BF3000 wrote: Thu Sep 02, 2021 8:47 pm OP, why pay 3x your taxable net worth for umbrella? I think you are overthinking this. Why not 1x? And it is not a complex strategy about hiring lawyers to drag out a lawsuit to keep sharks at bay. Suppose you goofed, swerved over the center line, and rendered a 5-year-old child a quadriplegic and killed his mom. Suing you for a lot of money would be a legitimate claim—not ambulance chasing—but the plaintiff would have no incentive to reject the policy limits if your accessible net wealth equaled your policy limits.
And if you have $3m in taxable and get $10m in umbrella, what's stopping from the insurance company tendering limits and the lawyer going onto the next target, i.e. you?

You could certainly fret and wring your hands and worry about those kind of catastrophic situations. But the reality is that all you can do is take reasonable measures to protect your assets, make reasonable decisions about the purchase of umbrella insurance, and take reasonable precautions to ensure, to the best of your ability, that risks of such a significant and catastrophic loss are minimized.

Only you know your teen and his level of maturity, responsibility, trustworthiness and judgment. It will be YOUR car he drives. If you aren't certain that he will exercise wise decision-making concerning his operation of your car, then don't permit him to do so. Set certain zero tolerance policies: no alcohol or drug use...period. No reckless driving or excessive speed...period. Driver and passengers always seat belted...period. Complete honesty concerning the use of the vehicle...period. Things like that. And then trust, but verify. Don't be hesitant to monitor your teen's driving. His right to privacy ends when you entrust him with the possession and operation of your vehicle. There are apps and other methods for doing this. If your teen says he is going to the library to study, drive by the library and make sure the car is in the parking lot.

If there is an issue, address it immediately with appropriate vehicle-related consequences. Be the parent....don't give in to the social pressures to be his "friend" and worry about whether other kids or parents will think you too strict, rigid or controlling. Take it from me...we raised three. The peer pressure among parents can be brutal but DW and I weren't on Facebook or other social media, we didn't make parenting decisions based upon what "everyone else" was doing, and we frankly didn't care what other parents thought about how we raised our kids. And believe it or not, we had a couple of parents who had the nerve to comment about our decisions, things like "________ said you won't let him drive for a month because he got a speeding ticket....that's pretty harsh. How is he going to get to school or hang out with his friends?" (Transport to school is taxpayer funded...it's called a SCHOOL BUS! And if his friends want to "hang out" they can come and pick him up or he can walk...not my problem to solve. Our son can figure it out.)

When I was a DA, I had to periodically send seventeen and eighteen year olds to prison for years for DUI caused fatality wrecks. I also went to scenes where the at-fault teen driver and his/her friends were all deceased in a wrecked vehicle because the driver was driving recklessly and failed to negotiate a curve or crossed the center-line and struck another vehicle. In many of those cases, these teen drivers were irresponsible kids, had a history of drug or alcohol use, or had other moving violations on their short driving histories. And yet, at least half of them were driving new or barely used expensive vehicles that Mom and Dad bought for junior because "all kids drink/smoke weed/drive too fast and _________ is really a good kid, he deserves a nice car/truck."

Forgive me if I am going too far into the "parenting advice" spectrum, but the best way to reduce the risk that concerns you is to reduce the likelihood of a serious injury or fatality wreck. IMO that requires oversight, supervision and matching permitted vehicle use with demonstrated levels of personal responsibility and trustworthiness.

Good luck!
coffeeblack
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Re: "Asset Protection" for young teenage driver in the household

Post by coffeeblack »

mathwhiz wrote: Thu Sep 02, 2021 7:46 pm Our son is approaching the age when he can apply for his learners permit and we are very concerned about protecting our assets if he gets into an at fault accident.

So the basics is we have a lot of money in "protected" assets from creditors and Florida is a very friendly state for asset preservation from lawsuits. Our ROTH's, 401k's, pensions, Homestead property. All protected and untouchable from my understanding.

That still leaves a 7 figure taxable portfolio that is a target. I could jack up the umbrella to millions but that won't stop an attorney from suing for everything if our son does something abominably stupid like kill someone drinking and driving. The premiums would also be very expensive.

So I'm interested in more advanced asset preservation options such as trusts and other structures that make these assets airtight from potential creditors.

Anyone have this experience and have suggestions?
I'm not an attorney. There is another option that can increase the layer of protection. It's not bulletproof. Nothing is. You can put your taxable assets in a Family Limited Partnership. You should talk to a good attorney that understands this structure well to see if it's a good option for you and to explain all the detail. Once you start and FLP it may be be somewhat difficult to unwind if you change your mind. Make sure you understand all the facts before you do it. It is a reasonable way to do things and in my opinion less difficult than a irrevocable trust.

I agree with the other posts that umbrella insurance should be first.
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Re: "Asset Protection" for young teenage driver in the household

Post by JackoC »

galawdawg wrote: Fri Sep 03, 2021 8:20 am
mathwhiz wrote: Thu Sep 02, 2021 8:52 pm So if I have $3M in taxable and get $3M in umbrella, what's stopping from the insurance company tendering limits and the lawyer going onto the next target, i.e. me? Especially with a kid involved and a sympathetic jury, why not get the full $6 Million judgment or is the insurance company going to force the attorney to waive the right to sue me as part of the settlement?
BF3000 wrote: Thu Sep 02, 2021 8:47 pm OP, why pay 3x your taxable net worth for umbrella? I think you are overthinking this. Why not 1x? And it is not a complex strategy about hiring lawyers to drag out a lawsuit to keep sharks at bay. Suppose you goofed, swerved over the center line, and rendered a 5-year-old child a quadriplegic and killed his mom. Suing you for a lot of money would be a legitimate claim—not ambulance chasing—but the plaintiff would have no incentive to reject the policy limits if your accessible net wealth equaled your policy limits.
And if you have $3m in taxable and get $10m in umbrella, what's stopping from the insurance company tendering limits and the lawyer going onto the next target, i.e. you?

You could certainly fret and wring your hands and worry about those kind of catastrophic situations. But the reality is that all you can do is take reasonable measures to protect your assets, make reasonable decisions about the purchase of umbrella insurance, and take reasonable precautions to ensure, to the best of your ability, that risks of such a significant and catastrophic loss are minimized.

Only you know your teen and his level of maturity, responsibility, trustworthiness and judgment.
I agree to fully clarify, one might default to thinking the insurance coverage would equal your assets but the two numbers, insurance coverage and your asset size, and are only indirectly connected. You pay for enough insurance to make it sufficiently unlikely a judgement against you exceeds the amount and thus starts to hit your (not otherwise protected) assets, though the amount of that projected judgement could be much larger than your assets. It's really pretty hard to estimate what that should be given a particular insurance premium per $ coverage. So it's tempting to assume some simple relationship.

We had the advantage of modern urban teenagers, they and friends were much less amped up about driving at the first possible second than my friends and I a generation earlier in the suburbs, or probably still in a lot of areas now. They first drove 18-20 range. No (known to me) drunk driving or accidents caused by them, though a friend driving one of our cars with one of our kids totaled it and they were lucky to suffer minor injuries, trooper discovering the wreck said he was thinking 'here's some DOA's' (just bad driving, overreacted to the wake of a semi and lost control). 'Only you know your teen'. You know better than disembodied voices on the internet yes, but the problem is you don't actually necessarily know what your kid is into. If our kids had ever been into really bad things, I'm not sure we would have known in time. It's easy to call that 'bad parenting' but I call it reality. I believe a good deal of luck is involved to get through that period with the damage contained.

So it's a worry you're not going to be able to wholly lay to rest until they are through those years OK, IMO.
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gwe67
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Re: "Asset Protection" for young teenage driver in the household

Post by gwe67 »

This app worked well. If the kids don't want to participate, don't give them your car keys.

https://www.life360.com

Especially the driving safety features.

https://www.life360.com/features-driving-safety/
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Joey Jo Jo Jr
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Re: "Asset Protection" for young teenage driver in the household

Post by Joey Jo Jo Jr »

Spousal limited access trust aka SLAT. Avoids the self settled trust rule because you are not the beneficiary, your wife is. Note the assets have to be in your sole name first, or then it would be self settled as to your wife. Should qualify as a grantor trust so you don’t need a separate tax return. Wife can even be trustee if structured properly.
BF3000
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Re: "Asset Protection" for young teenage driver in the household

Post by BF3000 »

If plaintiff sues and insurer offers policy limits of $3m, the plaintiff must release all claims against you. P can’t collect the insurance payment and then sue you for $6M (or $1 or any other amount).

So, if you have $3m in taxable and a $3m umbrella policy, the plaintiff has little incentive to reject the offer and keep the lawsuit going because the most he can immediately collect from a judgment is $3m out of your taxable.

I suppose he might garnish your wages after taking your $3m, but that is a pain, delayed, and unlikely to incentivize a plaintiff to reject the settlement offer m. Remember, if they reject the settlement offer, they have a risk of recovering less than the offer and may have to pay for expert witnesses and such. So, for the super nervous type, perhaps insuring a -little- more than taxable balance may make a person sleep better. My independent insurance agent recommended 1x taxable and no more.

If 3x taxable makes you feel better, then go for it. But you were worried about the cost, and 1x is reasonable and less expensive.
Rwsavory
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Re: "Asset Protection" for young teenage driver in the household

Post by Rwsavory »

You have to consult with estate planning counsel in your state to get good advice on asset protection strategies involving trusts. I am a retired attorney, and I wouldn't bother with a trust unless there was something really unusual going on.
sc9182
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Re: "Asset Protection" for young teenage driver in the household

Post by sc9182 »

Rwsavory wrote: Fri Sep 03, 2021 11:32 am You have to consult with estate planning counsel in your state to get good advice on asset protection strategies involving trusts. I am a retired attorney, and I wouldn't bother with a trust unless there was something really unusual going on.
Great advise. Don’t over complicate things - if you are truly worried, put adult kid on his/her own policy (yes pay thru the nose — but it’s likely to be 2-5-10 times cheaper than Trusts costs and all the quirks associated with such). Hv Good Umbrella policy coverage and call it a day.

If you are being that anxious- chances are you are expecting something “unusual” — if thus so, best solution is NOT to let that kid drive at all — until they are on their own ..

Good grades, potential Internship/job, (good credit depending on age), clean prior record (not just driving, but other areas of life too - u know what we are talking here), only speaks for good behavior and intentions of the teen — see if that helps your kid’s standing.

Definitely have your kid go thru recent state-approved Defensive Drivers course, some states may even have separate Financial-responsibility and/or DWI courses — May be you can have kid do those too. If you want to be more practical - let them drop a car-tire on their own bare foot 3-6 inches above., let them feel the pain/impact — and if a non-metal doing 1-2 Miles speed can cause that much pain — they gotta figure how human bodies (self and others) get impacted when 1-2 tons of Metal running 40-50-60-70 MPH or higher hits you !!

Don’t invent long-term solutions for short term issues (teen/late-teen driving - does go away with age). Millions of teen-drivers learn and/or drive on public roads every day in America - your kid is not the only one doing this.
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Re: "Asset Protection" for young teenage driver in the household

Post by VCC »

Annuities, including non-qualified ones like the variable Fidelity FPRA, receive the same asset protection as 401ks in Florida. There's a reason why OJ still has most of his money & lives in Florida. Of course, selling your taxable account to place it in an annuity would have a huge tax cost. Most people would prefer the taxable account with umbrella coverage & hope for the best.
JBTX
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Re: "Asset Protection" for young teenage driver in the household

Post by JBTX »

gwe67 wrote: Fri Sep 03, 2021 9:45 am This app worked well. If the kids don't want to participate, don't give them your car keys.

https://www.life360.com

Especially the driving safety features.

https://www.life360.com/features-driving-safety/
I used that for years. Yes it works well, but isn't perfect. But worth it for a teen driver.

There are other gps devices you could have put in.

It's my recollection that premiums didn't go up much with learners permit. They did go up once teen had independent license.

Some insurance / umbrella may exclude incidents as a result of criminal acts. I don't know if drunk or reckless driving would fall into that.
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Doom&Gloom
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Re: "Asset Protection" for young teenage driver in the household

Post by Doom&Gloom »

JBTX wrote: Fri Sep 03, 2021 5:14 pm
gwe67 wrote: Fri Sep 03, 2021 9:45 am This app worked well. If the kids don't want to participate, don't give them your car keys.

https://www.life360.com

Especially the driving safety features.

https://www.life360.com/features-driving-safety/
I used that for years. Yes it works well, but isn't perfect. But worth it for a teen driver.

There are other gps devices you could have put in.

It's my recollection that premiums didn't go up much with learners permit. They did go up once teen had independent license.

Some insurance / umbrella may exclude incidents as a result of criminal acts. I don't know if drunk or reckless driving would fall into that.
We have used this app for years--since DS began driving. We were far more interested in location than driving habits. I stopped checking on DS's whereabouts after his second year in college. DW still checks on his location at age 23. We did have to admonish him not to turn it off during his first year of college due to DW's mother-henning him too closely.

I would suggest discarding its use after the first 6-12 months of the kid's time away from home.
KlangFool
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Re: "Asset Protection" for young teenage driver in the household

Post by KlangFool »

JBTX wrote: Fri Sep 03, 2021 5:14 pm
They did go up once teen had independent license.
JBTX,

We found that the answer is highly dependent on each insurance company. It pays to shop around. We save about $1,000 or more per year by switching insurance company.

He/she shop around get the best deal!

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smitcat
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Re: "Asset Protection" for young teenage driver in the household

Post by smitcat »

HereToLearn wrote: Thu Sep 02, 2021 8:37 pm
an_asker wrote: Thu Sep 02, 2021 8:29 pm
HereToLearn wrote: Thu Sep 02, 2021 8:25 pm
mathwhiz wrote: Thu Sep 02, 2021 8:16 pm I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver? Does 3 x taxable assets in the umbrella enough to keep the ambulance chaser types at bay? How much umbrella is enough? My agent tells me premiums would be in the thousands with a teenage driver but probably much cheaper than the trust structure you describe for sure.
oldfort wrote: Thu Sep 02, 2021 8:08 pm Why not increase your umbrella limits? Whatever it costs, it has to be an order of magnitude cheaper than hiring a lawyer to create an offshore trust or DAPT, paying a corporate trustee to manage the trust for the rest of your life and whatever drag comes from the corporate trustee making sub-optimal or high cost investments.
You might want to check with a different agent, or perhaps rates vary massively by location. I pay $623/year for $5 million of coverage with my HO carrier. I have my car insurance with a separate carrier, and the rates were much higher when I quoted umbrella with them. My boys are 22 & 24, and I have been paying the same annual premium for perhaps five years now.
Umbrellas (and other insurance as well) vary massively by location. :oops: As I've complained on this board a few times, when I priced it out, it was nearly $1,000 for a $1 million policy here in FL.
I guess I am glad I don't live in Florida then. Cannot imagine how much the auto insurance premiums would be. Bad enough insuring a 22 year old male.
Like many places it depends on the exact zip code and other details.
typical.investor
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Re: "Asset Protection" for young teenage driver in the household

Post by typical.investor »

smitcat wrote: Fri Sep 03, 2021 7:13 pm
HereToLearn wrote: Thu Sep 02, 2021 8:37 pm
an_asker wrote: Thu Sep 02, 2021 8:29 pm
HereToLearn wrote: Thu Sep 02, 2021 8:25 pm
mathwhiz wrote: Thu Sep 02, 2021 8:16 pm I suppose a $5 or $10 Million umbrella would force the insurer to defend a suit like crazy and draw it out years so they eventually settle. I guess how much umbrella protection is enough is the question and what the risk is with a teenage driver? Does 3 x taxable assets in the umbrella enough to keep the ambulance chaser types at bay? How much umbrella is enough? My agent tells me premiums would be in the thousands with a teenage driver but probably much cheaper than the trust structure you describe for sure.

You might want to check with a different agent, or perhaps rates vary massively by location. I pay $623/year for $5 million of coverage with my HO carrier. I have my car insurance with a separate carrier, and the rates were much higher when I quoted umbrella with them. My boys are 22 & 24, and I have been paying the same annual premium for perhaps five years now.
Umbrellas (and other insurance as well) vary massively by location. :oops: As I've complained on this board a few times, when I priced it out, it was nearly $1,000 for a $1 million policy here in FL.
I guess I am glad I don't live in Florida then. Cannot imagine how much the auto insurance premiums would be. Bad enough insuring a 22 year old male.
Like many places it depends on the exact zip code and other details.
Even $1000 seems relatively cheap.

An Asset Protection Trust will, I believe, require an independent trustee. The cheapest I have ever found is 0.1% which on a million dollar taxable account that the OP has is $1000. But there are trust set up fees, and legal fees drafting it and that price doesn’t include asset management which you might get via a robo advisor for 0.3% or so.

If you have a trusted relative to be the trustee and investment advisor for free then maybe things are different, but what if you have a falling out or they pass away or just something happens.

My understanding is simply that if you can control the trust, that creditors can reach it. And so you need an independent trustee. Perhaps I am wrong.
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snackdog
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Re: "Asset Protection" for young teenage driver in the household

Post by snackdog »

Another popular solution is to not provide teens vehicles and insurance. There is no urgency, so they can wait until they have grown, mature, employed and can afford their own wheels and insurance.
hoofaman
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Re: "Asset Protection" for young teenage driver in the household

Post by hoofaman »

Why not just wait until the kid is 18, and then give them money to buy their own car and insurance?
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Re: "Asset Protection" for young teenage driver in the household

Post by JackoC »

hoofaman wrote: Fri Sep 03, 2021 10:01 pm Why not just wait until the kid is 18, and then give them money to buy their own car and insurance?
That may look unrealistic from POV of parents whose kids are part of traditional American Car Culture. But like I said before, our kids and their peers were focused on when/how they could roam independently in the City (NY), not cars. They got their licenses when 18 or over without there being any fights over it. But there are always things to worry about (and fight over :happy ) with teenagers, probably including risks that are higher in our area than some other places.

People mentioned trusts but that seems to me tail wagging dog for teenage drivers, if the structure would actually hold up, which as a rule means you must actually lose material control over your money. Somebody mentioned Spousal Lifetime Access Trust which is a 'form over substance' maneuver while the spouses are alive and together (a grantor trust whose income lands on grantor's tax return and the spouse with access can be trustee at least in some states, and take out money both can use: all around closely mimics nothing having happened). However if the spouse with access predeceases, the other one no longer has any access to the money which then goes to the ultimate beneficiaries, usually the children. That's a serious difference compared to money just being in either spouse's name. How divorce would be handled varies but would also generally result in the grantor losing access to the money. Can be a good structure where you're saving potential millions in estate tax. For example give full individual estate tax exemption amount $11.7mil to SLAT now, then when the exemption halves (give or take inflation adjustment) after 2025 *under current law* your exemption goes to zero, not -11.7mil/2. So you saved $11.7mil/2*40% in estate tax for heirs even assuming no real growth in the portfolio. *That* can be worth navigating scenario's where grantor loses access to the money, also depending how much other money there is. But I doubt it just as asset protection measure for teenage drivers. You could have two SLAT's, one with access for each spouse, but quirks of past tax cases means the two can't be too close to mirror images or might be disallowed. And it would still reduce the money a surviving spouse has access to vs. keeping money in spouses' names and it all goes to the survivor.
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gwe67
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Re: "Asset Protection" for young teenage driver in the household

Post by gwe67 »

snackdog wrote: Fri Sep 03, 2021 9:50 pm Another popular solution is to not provide teens vehicles and insurance. There is no urgency, so they can wait until they have grown, mature, employed and can afford their own wheels and insurance.
Good suggestion. And a lot of rideshare (Uber/Lyft) can be bought for what would have been spent on vehicles and insurance. Also takes joyriding/racing/DUI, etc. out of the risk equation.
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Re: "Asset Protection" for young teenage driver in the household

Post by ZWorkLess »

What we did was ramp up our umbrella AND we transfer ownership and help them get their own auto policy as soon as practical. The more risk-taking the kid, the earlier we try to get them off our policy. If you can get them a car that’s cheap enough not to require comprehensive coverage, that might be reasonably affordable not long after licensing. If they’re driving a car needing comprehensive coverage, IME, coverage becomes reasonably priced around the time they’ve been licensed (and insured) for three years. (Our youngest kiddo will get title and her own insurance when she’s home from school over the holidays… three years on the nose from getting her license. I admit I’ll breathe a little easier…)

It’s probably cheaper to gift them a $5-10k car and pay for THEIR insurance for a few years than mess with trusts, etc. Get pricing from your agent… I’ve spent a good bit of effort doing that over recent years to determine best strategies for each kid.

At the end of the day, I’m a lot more worried about them staying alive and not killing anybody than money…. So invest in whatever it takes to minimize those risks, too. Safe car with good safety features, good driving education… Could put a speed/location tracking device in the car, delay the age you allow them to get licensed, limit mileage, etc.
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Re: "Asset Protection" for young teenage driver in the household

Post by bogledogle »

I have been in a few accidents driving expensive cars. A cousin totaled a luxury car of mine when he had a learners permit by running a red light. I have not been sued yet.

I am curious if anyone on this thread has actually seen a lawsuit trying to get at their assets? How did it go? Did your liability insurance do it's job?
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JAZZISCOOL
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Re: "Asset Protection" for young teenage driver in the household

Post by JAZZISCOOL »

gwe67 wrote: Thu Sep 02, 2021 8:03 pm
BF3000 wrote: Thu Sep 02, 2021 7:59 pm My daughter just got learner’s permit. I am an atty, but I use an estate atty because that area is not my specialty.

I believe that a trust has to be irrevocable before solid creditor protection is established. Still might not be bullet proof. Most people want to be able to change it.

Umbrella insurance isn’t expensive. Have you priced it? I have a $3M policy and don’t sweat it, and I am pretty frugal. If you have much more dough, then all the more reason you can afford it. I think umbrella policy should always cover unprotected taxable assets. I know you didn’t want such advice, but I think you are making a mistake.

For what it is worth, I designated my trust as an additional insured on my policy.
My kid had a $900 fender bender and my insurance carrier dropped my umbrella.
Interesting. I wonder if that would have happened if an adult caused the fender bender instead?
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Re: "Asset Protection" for young teenage driver in the household

Post by boglerdude »

> I am curious if anyone on this thread has actually seen a lawsuit trying to get at assets?

The only example of wages being garnished was a DUI + low 5-figure limit. Lawyers always settle for the policy limit rather than try and prove foreseeable negligence.
Last edited by boglerdude on Sat Sep 04, 2021 7:00 pm, edited 1 time in total.
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galawdawg
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Re: "Asset Protection" for young teenage driver in the household

Post by galawdawg »

Yes, I have seen that and not infrequently but every such case has involved a significantly under-insured defendant.
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Re: "Asset Protection" for young teenage driver in the household

Post by MikeG62 »

BF3000 wrote: Fri Sep 03, 2021 11:03 am If plaintiff sues and insurer offers policy limits of $3m, the plaintiff must release all claims against you. P can’t collect the insurance payment and then sue you for $6M (or $1 or any other amount).

So, if you have $3m in taxable and a $3m umbrella policy, the plaintiff has little incentive to reject the offer and keep the lawsuit going because the most he can immediately collect from a judgment is $3m out of your taxable.

I suppose he might garnish your wages after taking your $3m, but that is a pain, delayed, and unlikely to incentivize a plaintiff to reject the settlement offer m. Remember, if they reject the settlement offer, they have a risk of recovering less than the offer and may have to pay for expert witnesses and such…
This is very well said.

Personally, I don’t think matching the size of the umbrella to ones exposed assets is the right way to look at it. As BF3000 said, what is important is having enough coverage that a plaintiff and their lawyers wouldn’t even think of passing on the limits of the coverage if it were offered and taking a chance on a jury trial (especially when they don’t know the amount of your exposed assets).

FWIW, I carry a $5 million umbrella. It feels like enough and allows me to sleep well at night. I pay around $800 annually. I once got a quote on increasing the coverage - next tier with my insurer at the time was $10 million. The premium was around $3,500 (so 4.5X the cost for 2X the coverage). I passed on the increase.

Edited to add:

IANAL, but the strategy some suggested above to put the car and insurance in your teenagers name sounds suspect to me. Of course state law will govern, but it seems unlikely that you will be able to fully insulate yourself from any liability resulting from your teen's actions simply by changing the title and insurance policy. This assuming you bought the car and/or are paying for the insurance and/or are claiming him/her as a dependent on your taxes. I think the higher limit umbrella is the cheapest way to proceed. Once he/she has graduated from college, it might be fine then to move him/her to their own policy (assuming they own the vehicle and are paying their own way and are no longer your dependent. We did this with both our daughters when they graduated college and got their first real jobs. Thankfully we did as our youngest was involved in an auto accident ~six months after this and was sued by the other party. Her insurance paid out near the limit of her liability coverage (several hundred grand) and my DW and I had zero involvement in the lawsuit. The other parties lawyer did ask for copies of our auto insurance to make sure she was not listed on our policy. But that was the extent of our involvement. My daughter has since obtained a $1 million umbrella (same for our oldest daughter).
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tarnation
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Re: "Asset Protection" for young teenage driver in the household

Post by tarnation »

mr_brightside wrote: Fri Sep 03, 2021 7:12 am a couple of words since you asked:

as mentioned earlier -- get your kid a modest 4-dr sedan 4-cylinder. kids that age don't think the way you and I do : cost / benefit ... risk / reward... their brains aren't fully developed yet.

this is a horrible real-world tragedy that happened a couple years ago here in Tampa. two killed ... family destroyed -- kid sent to prison for 20+ years. kid was racing 100+ on a residential-type area. some blame should fall on Mom / Dad -- gave their son a Mustang to drive. super irony : Mom was an insurance company Exec...

https://www.tampabay.com/news/tampa/202 ... -sentence/


-----------------------------
I guess the big takeaway from that article for me is don’t buy a car that will snitch on you. From the facts given in the article, he was not speeding when he hit the woman ( who was jaywalking?). it seems the previous speeding was used to get him to take a plea. (which I don’t think is proper evidence if they go to trial ). If the car didn’t have data, it would have been a much harder case.

Edit: I wonder how many cases are there where the data is exculpatory?
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talzara
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Re: "Asset Protection" for young teenage driver in the household

Post by talzara »

tarnation wrote: Tue Sep 07, 2021 12:08 am I guess the big takeaway from that article for me is don’t buy a car that will snitch on you. From the facts given in the article, he was not speeding when he hit the woman ( who was jaywalking?). it seems the previous speeding was used to get him to take a plea. (which I don’t think is proper evidence if they go to trial ). If the car didn’t have data, it would have been a much harder case.
The 100 mph speed was recorded "moments before" the crash. That means the data was retrieved from the car's black box. All new cars are required by law to have an event data recorder.

Driving 100 mph in a 35 mph zone is an open-and-shut case.

The prosecutor did not need the navigation logs from previous days. That's just the prosecutor being thorough.
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tarnation
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Re: "Asset Protection" for young teenage driver in the household

Post by tarnation »

talzara wrote: Tue Sep 07, 2021 1:05 pm
tarnation wrote: Tue Sep 07, 2021 12:08 am I guess the big takeaway from that article for me is don’t buy a car that will snitch on you. From the facts given in the article, he was not speeding when he hit the woman ( who was jaywalking?). it seems the previous speeding was used to get him to take a plea. (which I don’t think is proper evidence if they go to trial ). If the car didn’t have data, it would have been a much harder case.
The 100 mph speed was recorded "moments before" the crash. That means the data was retrieved from the car's black box. All new cars are required by law to have an event data recorder.

Driving 100 mph in a 35 mph zone is an open-and-shut case.

The prosecutor did not need the navigation logs from previous days. That's just the prosecutor being thorough.
I don’t think it is open and shut without all that data from the vehicle. And without it the plea deal also gets better. What year was that law you referenced enacted?
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talzara
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Re: "Asset Protection" for young teenage driver in the household

Post by talzara »

tarnation wrote: Tue Sep 07, 2021 1:31 pm I don’t think it is open and shut without all that data from the vehicle. And without it the plea deal also gets better. What year was that law you referenced enacted?
The Highway Safety Act of 1970 allows NHTSA to set regulations for vehicle safety.

When I looked up the black box regulation, it turns out that NHTSA withdrew it because new cars already have event data recorders installed. It doesn't make sense to me. New cars also have seat belts installed, but the regulations still require seat belts.

Therefore, I must correct my statement. The black box is not required by law, but this young man's car had one anyway. Even if there hadn't been a navigation system in the car, the black box proved that he was driving 100 mph in a 35 mph zone.
Retrotied
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Re: "Asset Protection" for young teenage driver in the household

Post by Retrotied »

Florida has very good constitutional and statutory protections that have been mentioned. A couple of additional ideas to consider: 1) title the non-retirement brokerage account JTBE, joint tenants by the entirety which is available for husband and wife in Florida. I am told it offers better asset protection. 2) have your vehicles titled just in the name of the spouse primarily driving it. If your child is driving one of your cars, the non-owning spouse’s assets hopefully are not implicated. Similarly protects each spouse from the other’s poor driving if in their own titled car. I gradually changed my vehicles over as new ones were purchased and titled. DW had a fleet of cars until the kids eventually got their own.
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