Accountants, including certified public accountants (CPAs), are intimately involved in the financial lives and well-being of their clients. Despite conscientious adherence to best practices, blame can fall on the accountant when a client suffers a financial misfortune. The ability to protect personal assets when allegations of professional wrongdoing are made is one of the benefits of DAP trusts for CPAs and all accountants.
Accountant Liability and Wealth Protection: The Benefits of DAP Trusts for CPAs
Accountant and CPA malpractice claims can devastate your business, and, without proper planning, these claims can also impact your personal life and finances. Domestic asset protection (DAP) trusts—also called spendthrift or self-settled spendthrift trusts—can play an important role in the management of risks associated with accountant liability and wealth protection.
Once an incident has occurred or been alleged and a claim has been filed against you, it is likely too late to reap the benefits of a DAP trust. An experienced estate planning lawyer can assist you in taking preventive measures to protect your business and personal interests in preparation for the possibility that allegations of professional misconduct could be made against you.
Common Causes of Accountant and CPA Malpractice Claims
The relationship between a client and accountant involves a high level of professional responsibility and scrutiny. In some cases, accountants have a fiduciary duty to their clients, which lowers the bar for evidence of professional errors when an accountant or CPA malpractice claim is made.
Sources of claims alleging accountant liability include the following:
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Advice or statements that are inaccurate or misleading;
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Failure to maintain a professional standard of care;
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Errors, omissions, and mistakes in financial management, accounting, or advice;
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Negligence or poor performance of duties;
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Breach of duty or contract;
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Failure to follow industry rules or government regulations; and
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Fraud
The Potential Impacts of Accountant and CPA Malpractice Claims
An account or CPA malpractice claim, regardless of its validity, can have serious consequences for the business and personal affairs of the accused. In addition to the stress of the conflict and related legal procedures, these incidents can irreparably damage an accountant’s reputation.
Investigations and the legal process for CPA malpractice claims are often costly in terms of time and money. Accountants should prepare for the worst by consulting with an estate planning lawyer, who can help them define the appropriate steps to manage accountant liability and wealth protection in advance. When allegations have already been made, a skilled attorney plays a critical role in minimizing damages and protecting your interests.
What Are the Benefits of DAP Trusts for CPAs and Accountants?
DAP trusts, when created and administered properly, can place your financial assets beyond the reach of creditors—like plaintiffs in a malpractice lawsuit. These trusts are currently allowed in 17 states, including West Virginia (WV) and Ohio (OH). Kentucky (KY) statute allows some aspects of a DAP trust, but not full benefits.
Fortunately, you do not have to reside in a state to create a DAP trust there, but you do need to be aware of how the laws of your state of residence and the state in which you seek to establish the trust will impact your rights. An estate planning lawyer with experience in accountant liability and wealth protection will be best-suited to help you analyze the most beneficial avenues for asset protection under the law.
Anna M. Price, an attorney with the Huntington, WV firm of Jenkins Fenstermaker, PLLC, knows the importance of proactive planning in accountant liability and wealth management. To learn more about the benefits of DAP trusts for CPAs and accountants, contact Anna by calling (866) 617-4736 or completing her online contact form.