Asset Protection

Many spouses would like to protect their assets from actual or potential creditors. Often, these individuals mistakenly believe that by simply placing an asset in the name of their spouse, they can protect that asset from creditors. Because California is a community property state, with very exacting requirements for inter spousal transfers, these self designed plans rarely work when challenged by a creditor. It has also been held by Appellate California Courts, as well as Federal Bankruptcy Courts, that inter spousal transfers are subject to the Fraudulent Transfers statutes. This does not mean, however, that well drafted “Transmutation Agreements” and “Post Nuptial Agreements” do not have their place in an asset protection plan. These agreements, as well as setting up an LLP (a Limited Liability Partnership), or establishing a trust can be effectively used to discourage any actual or potential creditor from pursing a claim against you. No plan can guaranty that your assets will be 100% protected, but a well thought out plan can help discourage a plaintiff from incurring the expense and time involved in pursuing a claim against you, and you may be successful in court if it proceeds to court. It has been estimated that 2/3 of creditors will abandon a claim when faced with a well thought out asset protection plan, and of the remaining 1/3, only a small percentage will actually prevail on the merits. Even if a claim has already been made, it is not too late to do something to help protect yourself. To do nothing is to almost certainly result in a loss of your assets if you are found liable. If you set up an asset protection plan with well drafted agreements, at the worst you will have made it more difficult for the creditor to succeed, giving you added leverage in settlement. In addition, you may succeed on the merits if the creditor tries to set aside you agreements. Everyones situation is unique, and each case must be evaluated to determine what asset protection plan might be the most suited to your situation. Each case must be evaluated based upon such factors as how you currently hold your assets (individual, corporate, partnership etc), who your actual or potential creditors are (bank, individual, IRS, etc), what exemptions may already apply (homestead etc), and if any claims have already been made and when. If you would like to discuss your options, and how our office can help you, please schedule an informative appointment to review your case with an attorney who specializes in California Family Law and who has extensive experience in collection issues.