Asset protection and
Fraudulent Transfer

According to information provided by various estate planning and asset protection resources, a Fraudulent Transfer (also known as a Fraudulent Conveyance) is a transfer that a debtor puts together to overcome a creditor’s collection efforts against him. This happens when, a debtor attempts to “sell” everything to his wife, a relative or a business partner for a small sum of money to keep his assets out of his creditor’s hands.

If the court discovers that the transaction is a sham to cheat the creditor, the court will set aside the transaction and force the person who holds the assets to return them to the creditor.

The basic of Fraudulent Transfer Law is this: You can’t do anything which impairs the rights of your unsecured creditors because, if you do, the courts will just ignore it.

Throughout the internet, there are thousands of individuals and companies offering assistance in protecting your assets from creditors, ex-spouses and or revenue authorities. And what is promoted by these people in regards to protecting your assets in have you take actions that could place you in violation of the Uniform Fraudulent Transfer Act.

If you’re foolish enough to follow their advice, you could wind up losing the assets you were trying to protect as well as having to pay the court costs, attorney’s fees or collection costs.

Also, if you have a relative or friend assist you, he could end up in court or having his credit ruined by having a judgment entered against him.

Many of these asset protection schemes involve the transfer of assets to someone you trust, such as a spouse, another relative, a friend or a business you formed. However, if the creditor can prove that the transfer was done to avoid creditors then, under the Uniform Fraudulent Transfer Act, the creditor has several remedies available to him. These involve having a judgment entered against you and the transferee, which in turn has the property transferred to be attached or levied upon or causes a lien to be placed against the property.

Another form of fraudulent transfer is when an estate planner advises you to set up a revocable living trust and tell you that any assets you have belonged to the trust and will be protected from your creditors. Ask any competent attorney and he will inform you that this is completely false. Since any assets placed in the trust are, in fact, your assets and since you have control of the trust, then you and the trust are one and the same, which means that a creditor can go after the assets in the trust. (Note: While a revocable living trust may not be a fraudulent transfer, it isn’t a good way to protect your assets from creditors, either.)

Keep in mind that not every asset protection company is a scam. There are scores of asset protection companies that are reliable and have excellent reputations. However, when it comes to dealing with your money, you have to thoroughly search out the one best for you. As always, your best bet is to consult with an attorney knowledgeable about estate planning and a CPA if you want to set up a solid asset protection plan.