- It seems that the first step to defensive planning is to get your assets
out of your own name. Correct?
Yes, unless your assets are exempt, title them to a protective entity.
As long as the entity itself is not a debtor, then a subsequent transfer
by that entity will not be considered fraudulent under the UFTA. Accordingly,
when a creditor threat arises, you can then reinforce the entity or transfer
the asset to a new entity, with less fraudulent transfer concerns because
the UFTA only considers transfers the debtor makes as being fraudulent.
Furthermore, restructuring an entity so that a creditor of the entity's
owner cannot reach the entity's assets for its owner's debts usually
does not involve a transfer, and is therefore not considered to be a fraudulent
transfer in most states. Even if it is, as long as the entity is not a
debtor, then a transfer from the non-debtor entity to another entity is
usually not considered fraudulent under fraudulent transfer law.
- For protection why can't I just title my assets to someone else so
they can't be claimed by my creditors?
Using 'straw men' is always poor planning. First is the fraudulent
conveyance pitfall. Gifting your assets to a friend or relative
after you're sued with the tacit understanding that they'll later return
your assets seldom works. Even if you title your assets to a 'straw'
before you have creditors, how do you know that your 'straw' is safer
from lawsuits than you? Nominee 'straws' have their own marital
problems, creditors and lawsuits. Your straw can easily lose
your assets to
their creditors. You also incur a gift tax when you transfer assets to someone
other than your spouse. And your nominee straw incurs a gift tax when
he re-transfers your assets to you. The third problem is that you can't
be certain that your nominee will return your assets. Not every straw
or nominee is trustworthy.
- What about titling marital assets to my spouse who has less liability exposure?
Having a less liability-prone spouse own all the marital assets has fewer
drawbacks. And sometimes it is sensible to title the family assets to
the less vulnerable spouse. But this too raises problems. You may title
your million dollar home or other assets to your spouse for protection
on the belief that your spouse won't get sued, but how do you really
know this? This arrangement also has estate planning disadvantages. When
marital assets are titled to both spouses, the spouses can more advantageously
plan their estates because each can use credit shelter trusts to maximize
their death tax credits. When the assets are titled to only one spouse,
only that spouse can claim his or her estate tax exemption. The remainder
of your spouse's estate will be taxed. This can cost your heirs a
considerable estate tax. Assets titled to only one spouse forces a lopsided
estate plan, and you lose tax planning options.
Nor are assets titled to one spouse necessarily safe from the debtor spouse's
creditors. Even if the liability arose after the debtor's assets were
titled to the 'safe' spouse, a creditor might successfully argue
that the debtor-spouse has an equitable or beneficial interest in at least
part of the property under a constructive or resulting trust theory; namely,
that the spouse holding title is a trustee for the debtor-spouse. This
argument is particularly likely to succeed when the debtor-spouse's
funds purchased the property or paid the mortgage, maintenance or property
upkeep. When the money invested in the asset came from the debtor-spouse,
the property is not truly the property of the other spouse. If a debtor-spouse's
assets are traceable to property, the defendant's spouse's creditors
can claim that property. You don't want to gamble on further litigation
over these sloppy issues. The best plan is free of these possible challenges.
Only in a few cases do we suggest titling all the marital assets to one spouse.
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