Hearing from a number of people lately who are straight up giving their assets away to family members in an attempt to hinder a pursuing creditor.
This is not a good idea. This type of transfer will be undone by a court.
Even if it were an effective strategy for asset protection, what would happen later? What if your friend/family/accomplice didn’t give you your stuff back?
Colin Ley is an asset protection attorney and the creator of the PREP Trust® and Better LLC™. He is also the co-founder of LayRoots (along with with partner in life & business – Shreya Ley)
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Whew, hey folks, that’s Colin.
No, that’s not,
Howdy folks, Colin and Shreya Ley here of LayRoots an Asset Protection and Estate Planning Law Firm.
In Seattle, Washington.
Today we want to add to the list of things we’ve talked about. An interesting asset protection strategy. It’s where you-
dig a hole in your backyard…pirate plan?
Wasn’t that kind of the premise of that one podcast? S-town, that we listened to, where people are digging around in that guy’s backyard?
‘Cause he was unbanked?
I guess we want to talk about bad asset protection strategies.
Yeah, that we hear, often.
Bad moves, and we, I think recently, in the past couple weeks, had a couple of folks who were panicked about a pending lawsuit or something coming up. And, basically what they did was they just started giving their assets away.
Just started giving ’em to family members, like here you go, take my house, here you go, take my LLC.
Yeah, take my LLC, take my house, take the car, anything that they felt had a larger perceived value, they’re like, giving it away.
Yeah, and it maybe makes some sense, on the surface, seems like, if it’s not mine you can’t take it.
But this goes back to the point we often talk about that asset protection planning has to be done early, it has to be done when the skies are clear, the waters are calm.
The birds are chirping.
Because otherwise, people are looking at, there’s things called voidable transactions, so essentially,
Some people call them fraudulent transfers.
That fraudulent transfers is the old school term for it,
I think people are a little more sensitive these days. That sounded really harsh, the word ‘fraud’ in it.
So its actually, a better description of it is voidable transfer. Essentially that’s because the transfer you made could be voided. So, say you give away your home to your cousin for a while, and you’re like “I can’t take any of my stuff because somebody else owns it.”
Right, and the judge may look at you and look at that back pattern and say, uh uh uh.
Right, and they just undo that transaction. The home gets placed back in your name, and then the creditor can take that home from you, or whatever asset it was that you tried to give away. So, its not good, it definitely doesn’t look good in a courtroom, and its not a very effective strategy, especially if you just gave it away and there was no, like, exchange of value. I mean even if there was an exchange of value, that’s something that could be undone. There’s basically a window of time after you transfer an asset to which a judge could, or a court could, undo or void that transfer. Depends on asset, depends on where you are.
Especially if they feel like it looks suspicious or was done under suspicious circumstances.
The other, like, reason this is a really bad idea is that, maybe they won’t give it back to you.
I mean, if your idea is that you would give it away and then your threat from a creditor goes away then the person would give you their home back, but maybe they won’t.
Yeah, maybe they decide that they like having it.
So that’s you know, the obvious downfall is, you give something away with the expectation that somebody gives it back but they don’t end up giving it back.
Yeah, that would suck!
You’d be pretty sad, then you’d end up losing the asset anyway.
All right, so, folks, if you’re thinking of just giving your stuff away,
Willy nilly, as an asset protection strategy, just don’t do it.
Maybe talk to an attorney first, figure out, yeah, call a professional, that’s a big move. That’s a big move, maybe think about it a little more and get some professional guidance.
Take care folks, put those shovels away.
Talk to you later.