Many people go through their lives believing they are probably not liable for anything until they suddenly get a shock letter through the door demanding that they turn up at court or pay a large fine.
As a homeowner, renter, or anyone else in any position in society, you’ll usually have personal liabilities. That’s because your daily activities carry risks with them. Many of these hidden liabilities lurk in everyday situations, so it’s worth knowing what they are and how you can be aware of them. Once you have full understanding, then you can avoid the financial risks associated with them and get on with your life.
Vicarious liability
Sometimes, if you have a large family, you might have vicarious liability. This applies to parents when they’re held responsible for the accidents caused by their minor children. For example, if a child vandalizes someone else’s property or a teen driver crashes into a lamp post, then the mum and dad are usually responsible. You could face liability claims that actually go beyond auto insurance limits.
The same applies to pets. Many states now have a bite and run law that protects victims. As such, you might be on the hook for payouts, so you need to check that your insurance covers this type of liability in the rare case that your dog might actually attack someone. Remember it’s not impossible. Dogs can sometimes behave erratically and not how you expect.
Lease co-signing
If you co-sign a lease or a loan, that’s also a liability worth being aware of. People who co-sign for student loans or car payments or apartment leases are on the hook if the primary loan signer can’t pay. Creditors will come after you, and they will hold you liable for the full amount. This is why, in general, it’s a good idea to avoid co-signing with anybody, even your own children.
What happens in the majority of situations is that you’re on the hook, and unfortunately, there is no way to ensure your way out of this one. You just have to pay the money.
Personal guarantees
Personal guarantees are something else that you’ll want to watch out for. If you own a small business and you personally guarantee leases and loans, your savings could be at risk if the business fails.
Therefore, make sure that you always make changes to the structure of your business to protect your interests. Also, don’t sign away anything in your own name. Always put it in the business’s name or refuse to take part in the transaction.
Unreported tax issues
Finally, if you are married, then you could be jointly liable for unreported tax issues, a lack of payment, or even tax debt of your partner. The IRS considers households as a single unit, so if you and your partner file jointly, you are both responsible for each other’s taxes. This is something that you will need to bear in mind. This is one of the reasons why it can be dangerous for one spouse to deal with the finances by themselves. It means that the other one is cut off from knowing what’s happening until it is too late.
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