Asset Protection Purpose
The purpose of this website is not to provide advice or to assist anyone individually intending to fraudulently transfer assets from existing creditors. However, protection from one’s potential future creditors or the existing or future creditors of your family members may be a legitimate course of your action.
Rules of Thumb
- The more control relinquished, the better.
- The sooner control is relinquished the better.
- The more distant the party to whom control is relinquished, the better.
- The “fuzzier” the owner’s ownership, the greater protection.
Helpful Hints
- Use multiple entities.
- Use LLC, LLP, LLLP, and FLP.
- Revocable trusts avoid probate but do not necessarily protect assets.
- Avoid joint ownership.
- Place life insurance into irrevocable trusts.
- Use spendthrift clauses in trusts (creditor can’t compel distributions).
- Use discretionary trusts (beneficiary can’t compel distributions).
- Use charitable trusts or family foundations.
- Corporations: adhere to formalities, avoid undercapitalization and commingling.
- Transfer the exemption equivalent amount ($600K) [unified credit against estate and gift tax] to spouse.
- Fund qualified plans (ERISA) not IRAs.
- Put money into children’s names/trusts [UGMA/’2503(c)]and use gift/leasebacks.
- Use Qualified Terminable Interest Property Trusts (QTIP) to protect your children from your spouse’s next family.
- Use buy-sell agreements and protect from spouses of partners.
- Bankruptcy presumption of insolvency; client has burden of proof.
- Voidable transfer w/i 1 yr. (or longer) of bankruptcy filing.
- Avoid badges of fraud: gifts to family member or insider, concealed transfer, pending legal action, concealing assets, transfer for inadequate consideration.
- Avoid constructive fraud (if renders debtor insolvent [balance sheet test], retains insufficient capital to meet future business needs).
- Use prenuptial agreements and segregate your inheritance.
- Avoid being an officer or director; don’t name your spouse as the corporation’s secretary.
- Maintain umbrella wraparound accident insurance on home/vehicles.
- Use employment agreements which protect trade secrets, customer lists and have non-compete provisions.
- Establish the identity of your client (elderly person or the children).
- Move to Florida (great homestead, annuities and life insurance cash value protection) or Texas.
- Consider utilizing Delaware or Alaska laws.
- Incorporate in Nevada (liable only for gross negligence).
- Utilize foreign (offshore) trusts.