Alabama

Alabama is known as one of the two greatest plaintiffs’ havens in the U.S.(the other is the Beaumont area of Eastern Texas), with local juries awarding ludicrously high verdicts while the appellate judges seem perfectly content in allowing them. Therefore, you should consider very carefully about opening a business in the state of Alabama.

Furthermore, the Alabama legislature doesn’t think much about homes being worth much, since only $5,000 of a home’s value may be protected from creditors, and it’s double that for a couple. Life insurance in Alabama, if properly structured, can be protected from creditors. However, annuities are fair game past $250 per month. Other then that, the asset protection laws in Alabama are unremarkable.

Alaska

Alaska was the first state to codify the self-settled spendthrift trust (also known as a Domestic Asset Protection Trust) in an attempt to compete with offshore trusts. Saying that the state of Alaska’s trust legislation is anti-creditor is a terrible understatement. Although there are a good many professionals having serious reservations about whether Alaska’s domestic asset protection trust legislation will provide effective asset protection, Alaska’s very low premium tax rate for life insurance makes the state of Alaska a useful jurisdiction for those who desire to purchase life insurance inside a trust.

Arizona

Since the state of Arizona limits the remedy creditors of a member of a limited liability company have to a charging order, it is sometimes used by residents of California as an alternative to the defective California limited liability company which will allows a judge to liquidate a limited liability company’s interest to satisfy creditors. Otherwise, Arizona is a very creditor-friendly state. Arizona gives minimal homestead protection and little protection to the cash value of life insurance policies, but it does afford significant protection to IRAs and pension plans.

Arkansas

The state of Arkansas offers nominal protection to homestead, which is not even worth paying attorney fees to make sure that it applies. Properly structured life insurance arrangements can be protected for creditors.Good news for debtors is that annuities are exempt from creditors.

California

Residents and business owners in the state of California often need very substantial planning assistance. Here are some problems encountered by California residents and businesses:

California's homestead provides a maximum $125,000 homestead exemption;

California courts have held that the statute of limitation for a fraudulent transfer claim does not begin to run until a creditor obtains a judgment; in most other jurisdictions, the limitation period generally begins at the time of the transfer. Therefore, no transfer in California is safe from a fraudulent transfer claim until at least seven years the stated time in the unique "extinguishment" statute of limitation under the California Uniform Fraudulent Transfer Act has passed;

In California, limited liability companies are subject to stiff gross receipts taxes;

The California Franchise Tax Board is infamous for being very tough;

California debtors have to choose from the state exemption systems only because federal bankruptcy exemptions are not allowed. The state of California divides its exemptions into two systems. Debtors in the state may only opt for one system; they may not pick and choose exemptions from both systems. Selecting the right systems depends on the debtors’ assets, type of bankruptcy filing, and other factors.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.