Kids and Asset Protection

Review Your Structures When Your Child Gets A Drivers License

Your risk exposure goes through the roof when your child under 18 years old obtains a drivers license.

Are you surprised?  Didn't you read the fine print?

In most states, the application for an instruction permit or drivers license must be signed by a parent or custodian of the child.  And by signing that simple form you agree to be responsible for the negligence or misconduct of the minor while they are driving.

So if your 16 year old son, god forbid, gets in a horrific car accident not only is he responsible for the resultant damages but equally so are you.  Are you thinking about protecting your assets yet?

These laws can ensnare all sorts of innocent parties.  For example, in Nevada, if neither parent has custody and there is no custodian, an employer may sign the drivers license application form. (N.R.S. 483.300)  Of course, having a young employee who can drive may be a benefit to an employer.  But what the employer may not realize is that he or she has just become personally responsible for any accident, and the resulting direct and consequential damages, the young driver may cause. 

In addition to driving there are other areas where an unruly child can get a parent into trouble.  In Arizona, for example, parents and custodians are responsible for their minor's bad behavior:

"Any act of malicious or willful misconduct of a minor which results in any injury to the person or property of another, to include theft or shoplifting, shall be imputed to the parents or legal guardian having custody or control of the minor whether or not such parents or guardian could have anticipated the misconduct for all purposes of civil damages, and such parents or guardian having custody or control shall be jointly and severally liable with such minor for any actual damages resulting from such malicious or willful misconduct." (A.R.S. §12-661 A)

While the law limits the parent's responsibility to $10,000, that amount is for each wrong, which can quickly add up.  As well, the law allows insurance companies "to exclude coverage for the acts of a minor imputed to his parent or legal guardian." (A.R.S. §12-661 C)  This means the parent will have to personally pay the $10,000 per infraction.  In California the parent's amount is $25,000 for each tort of the minor, which an insurance company does not have to pay. (Cal. Civ. Code §1714.1)  In a sign of the times, the California law specifically holds parents responsible for a minor's graffiti defacings.

What does all this risk mean for parents?

That asset protection is crucial for those whose children are coming of age.  Be sure to work with your asset protection advisor to make sure all assets are protected.  (If you need such an advisor feel free to call us at 1-800-700-1430.)  Consider holding your brokerage account in a Wyoming or Nevada LLC.  Otherwise, if that valuable account is in your name as an individual it will be the first place a judgment creditor will look to satisfy their claim.

So before you sign that form making you personally responsible for your minor child's driving activities, double check and make sure your assets are protected.  Your personal residence, your brokerage account and all of you other valuable assets must be protected before your children start driving, and increasing your risk profile.