One of the primary goals of estate planning is to protect your estate so that you, your spouse, your children and others you designate can benefit from it. Unexpected disasters or problems can interfere with achieving this goal. You can lose your job, developed a major illness or find yourself in a long-term care facility. So your estate planning needs to take such possibilities into account.
Fortunately, it’s possible with careful estate planning position yourself so you can survive these kinds of events with most of your assets still intact. However, you don’t want to do this in a way that causes your creditors to accuse you of making fraudulent transfers. To avoid this possibility, you should engage the services of a knowledgeable New York City Fraudulent Transfers Lawyer.
What Is a Fraudulent Transfer?
Fraudulent transfer describes a transfer of assets that is designed to prevent the payment of a creditor who would otherwise be able to collect a debt against those transferred assets. This often occurs when an individual is facing financial problems and considering bankruptcy. During bankruptcy, the trustee of the bankruptcy can seize debtor assets, selling such assets to pay off creditors.
Some people in financial trouble will use fraudulent transfers to keep assets from the trustee and the creditors in a bankruptcy. This is why the trustee will look closely at any recent transfers of property or sales of assets. Transferring assets to a so-called “insider” like a business partner or relative would be suspicious. Generally speaking, the following are factors the court will consider when determining if you committed a fraudulent transfer:
• Was it an insider transaction?
• Did you still maintain control and possession of the asset?
• Did you attempt to hide the transaction?
• Was a creditor threatening to sue you prior to the transaction?
• Was a sizable proportion of your assets involved in this transaction?
• Did you attempt to flee after making the transfer?
• Was the valuation of the asset in the transaction reasonable?
• Had you become insolvent, or did this transaction push you into insolvency?
Fraudulent Transfer Consequences
The primary consequence of engaging in a fraudulent transaction is the possibility that the court may well reverse that transaction. This is highly likely if the individual receiving the asset was aware of the fraudulent transfer. However, if the new owner of this asset did not know that your creditors had prior claims on that asset, then this buyer will most likely be allowed to keep his or her property.
How to Legally Protect Assets
Your overall estate plan can include a sound – and perfectly legal – means for effectively protecting your assets from any future creditors that avoids any suggestion of fraudulent transfer. However, you cannot use this approach to evade your current creditors. And irrevocable living trust is one way to transfer assets in order to protect them in the future. Such a trust holds onto an asset for the benefit of someone else.
To create such a trust you – the grantor – would shift assets into the trust, making it the owner of that asset. An irrevocable trust has a trustee – someone other than your self – to oversee it. The terms of the trust cannot be changed by you. This means any future creditors cannot touch them. Yet you can still enjoy the benefits offered by such assets. For instance, you might put your home in the trust so that it can be used by your family in the future and you in the present.
Revocable trusts are much less effective estate planning technique if you are attempting to protect your assets while avoiding any appearance of fraudulent transfers. With this type of trust, you as the trustee have the right to alter or revoke the trust. You can at some future time dissolve it, and even while it is in force you have virtually full control over your assets.
To avoid the possibility of engaging in a fraudulent transfer, you should contact Raiser & Kenniff, PC at 1-888-979-9566 to speak to a knowledgeable and experienced New York Fraudulent Transfers lawyer. You can also reach us online to schedule a free consultation about your estate plan.