Asset protection is a way of ensuring that an individual has access to their assets if they are sued or come under financial strain. It is important to understand when the best time for protecting your money and property is. In that way, you can safeguard your hard-earned assets without placing them or yourself in jeopardy.
What Is a Fraudulent Transfer?
A fraudulent transfer occurs when you transfer your assets with the intention of depriving your creditors of what they are due. It is important to ensure that any asset protection plans comply with these regulations. In that way, you can protect yourself from legal action. Generally it is best practice to act before entering into any situation where someone could accuse you of making a fraudulent transfer.
Fraudulent Transfer Look Back Period
Different states have different look back periods on fraudulent transfers. It is important to understand the law in the state where you reside and where your asset is located. The look back period refers to the length of time creditors can go back and claim a transfer was made in an effort to defraud them.
Typically, this time frame includes any transfer made within four years prior to filing for bankruptcy or when a creditor files a lawsuit against you. But there is a ten-year look back period in bankruptcy to assets that you transfer to a self-settled spendthrift trust. (A common type of self-settled spendthrift trust is called an Asset Protection Trust.) Therefore, it’s important to act sooner than later in order to properly protect your assets from potential legal action.
When Is Asset Protection Effective?
Protecting your assets generally works best when you do it before you face a legal problem or debt collection. This will help give you the maximum level of protection while ensuring that all assets are properly protected under the law.
When Is Asset Protection Illegal?
Asset protection can be illegal in certain situations, usually when it is used to defraud creditors or hide assets. That’s why it’s important to seek out professional advice and guidance before attempting any asset protection plan. Additionally, speaking with a lawyer who specializes in asset protection is the best idea. They can ensure that all the protective measures you choose are legal and follow state laws.
The right time frame for transferring your assets out of your name is when no creditors are immediately threatening you. Trying to set up an asset protection plan when lawsuits are already pending could result in a fraudulent conveyance. That can put you in more legal trouble. It’s also possible that certain assets may not be eligible for protection at this point as well. Therefore, it’s important to plan early and get the best advice you can on creating a comprehensive strategy. That will help keep your property safe now and in the future.
If you want help setting up a tried-and-true asset protection plan, give us a call at 602-443-4888.