We have previously written about asset protection planning on this blog, noting that it is an important adjunct to estate planning. The basic goal of asset protection planning is to protect the assets you leave to your estate from creditor's claims. Trusts and carefully planned gifting are wonderful tools within an overall asset protection strategy.
A recent Forbes article noted that there have been some recent changes in law concerning asset protection issues. This article will discuss judicial decisions related to fraudulent transfers.
As we have mentioned in the past, asset protection planning which is done after liabilities arise can lead to fraudulent transfer actions. In a fraudulent transfer action, a creditor or bankruptcy trustee sues a debtor for donating assets to an asset protection scheme in order to shelter the assets and avoid paying off their obligations.
We have also noted that transfers are considered fraudulent if they take place within a timeframe specified under the relevant statute. That time frame may include transfers made before the asset protection scheme was set up.
In a recent case from the Eastern District of Virginia, a U.S. magistrate judge issued a finding upholding the long-time rule that a company which transfers assets to another entity during a lawsuit or in expectation of a lawsuit without sufficient consideration will likely be found to have committed fraudulent transfer.
In our next post, we'll continue looking at this article and how our readers may benefit from the advice offered in it.
Source: Forbes, "New Case Law on Asset Protection," Lewis J. Saert, August 10, 2011.