Not necessarily. No law obligates a lawsuit defendant to hold his assets
for the benefit of his creditors, despite common belief to the contrary.
In fact, Supreme Court Justice Antonin Scalia, in one celebrated case,
announced, "A creditor has no cognizable interest in the assets of
a debtor prior to obtaining a judgment. Anyone can transfer their assets
all day long until the sheriff shows up with a Writ of Execution pursuant
to a court order."
Also contrary to popular misconception, a fraudulent transfer isn't
necessarily a crime. In most states it’s a civil remedy. It divides
irreversible transfers from transfers that can later be reversed by the
courts. With a fraudulent transfer, the transferor and transferee don't
commit a crime. And frequently, a defendant's attorney can successfully
argue that the transfer wasn't fraudulent. However, even if the defendant
loses, the court remedy is only to unwind the transfer.
The essence of fraudulent transfer law was well-stated in one Florida Supreme
Court case: "A fraudulent conveyance action is simply another creditor
remedy. It is either an action by a creditor against a transferee directed
against a particular transaction which, if declared fraudulent, is set
aside, thus leaving the creditor free to pursue the asset, or it is an
action against a transferee who has received an asset by means of a fraudulent
conveyance and should be required to either return the asset or pay for
the asset. A fraudulent conveyance action is not an action against a debtor
for failure to pay an amount owing from a prior judgment and does not
warrant an additional judgment against the same debtor because of the
fraudulent conveyance."
Clearly, it's not too late to take defensive measures once you are
sued – though you have fewer options than had you planned beforehand.
Still, even the most dire of situations has its solutions. Again, to quote
the Supreme Court, "A debtor [who is sued] need not be like a deer
frozen in the headlights of an onrushing auto. The debtor still has it
within his rights the opportunity to attempt to put his wealth beyond
harm's way."
The safest path, of course, is to protect yourself before you encounter
problems. You then have more planning options and less risk that your
transfer will later be challenged. Still, many clients in litigation are
advised by their attorney that it's too late to protect their assets
because a lawsuit has begun or is threatened. This is poor advice. It
makes no more sense than a doctor advising a patient that it's too
late to try to save herself because she has already contracted a disease.
Yes, you have fewer wealth-saving alternatives once you have a claim against
you, and yes, you need more creative and complex planning to safely shelter
your assets – but you do have options.
The Presser Law Firm, P.A. can integrate an Asset Protection Plan with
your existing Entities and Estate Plan or work with you to create a new one.
Contact us today for a complimentary preliminary consultation regarding
your Asset Protection options.
The Presser Law Firm P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(800) 999-9992 or e-mail
info@assetprotectionattorneys.com