Last Updated on: 21st October 2023, 08:52 am

Protecting Your Assets if Convicted of a Federal Crime

Getting charged with a federal crime can be scary. Your reputation, freedom, and financial future may all be at risk. While the best outcome is beating the charges at trial or reaching a favorable plea deal, it’s wise to also have a backup plan. An experienced federal defense attorney can help protect your assets even if convicted.

This article will cover various strategies a federal defense lawyer may use to shield your money and property. We’ll also look at steps you can take on your own to safeguard assets. With smart planning, you can mitigate financial damage despite a conviction.

Transferring Assets to a Spouse

If your spouse wasn’t involved in the alleged crime, transferring assets to them may protect those assets. Your attorney can help arrange property transfers and revise wills or trusts. However, transfers must happen before conviction. Courts will likely overturn transfers made after charges are filed. The government prevents defendants from hiding assets to avoid fines or restitution.

There are limits on transfers to spouses. Jointly owned property with “rights of survivorship” automatically passes to a spouse without probate. However, individually owned assets require retitling. If transfers seem aimed at hiding assets, judges can reverse them.

Shielding Retirement Accounts

Federal law protects qualified retirement accounts like 401(k)s and IRAs from creditors, including the government. However, regular withdrawals or early distributions may expose funds to seizure. Keeping money inside retirement accounts preserves their protected status.

Some exceptions exist. The IRS can levy retirement funds for unpaid taxes. Child support or alimony orders also override retirement account protections. But in general, keeping retirement savings untouched maintains their legal shield.

Filing for Bankruptcy

Bankruptcy stops collections against discharged debts. This can help defendants retain assets. However, criminal fines, penalties, and restitution usually survive bankruptcy.

One strategy is to file before sentencing. This discharges other debts, freeing up assets for potential fines and restitution payments. Defendants may also place assets in exempt categories shielded from creditors in bankruptcy.

Filing after sentencing discharges preexisting debts but likely not criminal monetary penalties. This helps defendants hang on to assets the court hasn’t already claimed.

Establishing Trusts

Trusts shield assets because the trust legally owns property, not the defendant. “Spendthrift” trusts restrict beneficiaries’ ability to sell or withdraw trust assets. This provides protection from creditors.

However, spendthrift trusts established after charges are filed may not hold up. Judges likely will see through them as attempts to dodge penalties. Trusts set up beforehand on good faith have a stronger chance of surviving.

Claiming Exemptions

Even without bankruptcy, federal and state exemptions protect certain assets:

• Home equity up to a threshold
• Motor vehicles up to a value cap
• Personal property like clothing and furniture
• Tools of the trade
• A wildcard exemption for any property

Exemptions don’t make assets totally untouchable to the government. But they do require creditors to obtain a court order before seizing exempt property. This extra step provides some asset protection.

Setting Up College Savings Accounts

Section 529 college savings plans enjoy strong creditor protections under federal law. Accounts must be created before charges are filed to maintain protection. Parents or grandparents can establish 529 plans naming grandchildren as beneficiaries without dipping into gift tax exclusions.

These accounts must be used for education to maintain protection. But defendants can still tap them for spouses or dependents. 529 plans should be disclosed to probation officers to avoid allegations of deception.

Obtaining a Surety Bond

Courts may allow defendants free on bail if they obtain a sufficiently large surety bond. This provides an insurance policy guaranteeing the defendant’s appearance at trial and compliance with conditions. If the defendant flees or violates release terms, the insurer compensates the government.

Surety bonds allow defendants to remain free pretrial. They also create an alternative asset source for fines and restitution if needed. This reduces pressure on the defendant’s own finances.

Removing Your Name from Shared Property

Co-owning property with a convicted defendant can lead to civil asset forfeiture. Even if the other owner was innocent, the government can seize jointly owned assets.

Removing your name helps insulate property. Quitclaim deeds transfer interest to the innocent owner. Taking your name off bank or investment accounts also distances assets.

Selling Non-Exempt Property

Liquid assets like stocks, bonds, and bank accounts have little protection. Selling these before conviction lets defendants apply the proceeds toward legal expenses or living costs. It also shrinks the pool of assets potentially forfeited.

However, courts may require defendants to disclose what happened to liquidated assets. Dissipating funds pretrial without a paper trail can be construed as hiding assets.

Things You Shouldn’t Do

Some strategies for shielding assets are illegal. Attorneys recommend against:

• Lying or misleading probate officers
• Concealing assets or income from pretrial services
• Disobeying court orders regarding property transfers or sales
• Using exempt retirement funds for non-retirement spending
• Withdrawing cash to avoid seizure of bank accounts

Engaging in fraud or deception creates further legal and financial exposure. Any asset protection strategy should be aboveboard.

Work With a Lawyer

Shielding assets from potential government seizure takes expertise. A federal criminal conviction can cost you money even if prison is avoided. Develop an asset protection plan as early as possible after charges are filed.

The most successful strategies are set up before indictment or conviction. Waiting until after sentencing limits options. An experienced attorney knows how to legally position assets to minimize monetary damage.

Facing federal charges is daunting enough without money concerns compounding the stress. Although a favorable trial outcome is ideal, contingency planning helps reduce financial risks. Work with a skilled lawyer to navigate this complex process.