Why is it Too Late for Asset Protection Planning after a Claim or Litigation Arises?
Jay Adkisson has written a very informative article about why it is difficult to do Asset Protection Planning after a claim or lawsuit arises. The article was published in Forbes. At Shenwick & Associates we get many telephone calls and emails from clients about Asset Protection Planning and we summarize that article below.
Under the Uniform Voidable Transactions Act (and its predecessor, the Uniform Fraudulent Transfers Act), a “claim” arises the moment the underlying event giving rise to liability occurs—not when a demand letter arrives, not when a complaint is filed, and not when a judgment is entered.
Any transfers made after that point are vulnerable to attack as voidable transactions.
Many debtors mistakenly believe they are safe if payments are current or no lawsuit has been threatened, but the law provides no such protection.
Mr. Adkisson states that post-claim transfers often trigger serious consequences far beyond simply unwinding the transaction.
-Creditors can sue the transferee—often a spouse, child, or friend—and obtain a judgment for the value of the transferred asset.
-Courts may award attorney’s fees, civil conspiracy damages, or even punitive or trebled damages if the transfer was intended to evade creditors. In bankruptcy, these transfers can result in denial of discharge under § 727, converting what might have been a dischargeable debt into a permanent financial burden.
Asset
protection planning must occur before any claim exists.
However, if a claim exists or litigation has been commenced clients are still allowed to utilize Federal & State Exemption statutes.
Clients or their advisors with questions about Asset Protection Planning should contact Jim Shenwick, Esq. 917 363 3391 jshenwick@gmail.com
Jim Shenwick, Esq 917 363 3391 jshenwick@gmail.com
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