Asset protection uses strategies to conserve accumulated wealth from involuntary transfers to others.
The four key strategic principles:
a) Change non-exempt assets to exempt assets
c) Transmute community property; Transfer outright ownership of assets to another
c) Create structures
d) Foreign shelters
We provide services in the first three categories. We can refer you to attorneys who deal in creation of foreign entities.
How effective are spendthrift clauses?
Every trust should include such a clause. However, they are limited in the protection they afford. Notwithstanding a spendthrift clause, a judgment creditor of a beneficiary may reach up to 25% of the amounts required to be distributed or actually distributed.
The two core strategies:
You have only two strategies:
1. Do nothing;
2. Do something.
• Legal entities, such as LLCs or corporations
• Trusts (i.e., irrevocable trusts)
• Domestic Asset Protection Trusts, Self-Settled Trusts
• Contractual provisions to limit liability
“Only a present or future creditor may bring a fraudulent transfer action under the actual intent test. Future potential creditors do not have standing to bring a fraudulent transfer action.” (J. Stein, 2/12/12, material p. 20)
Delaware—Division of Corporations—Website: www.corp.delaware.gov.
Protection Under a Delaware LLC:
Generally, the same as “C” Corporation. A member’s liability is limited to
amount of capital contributed unless acting as guarantor of corporate debt.
Annual Franchise Tax of Delaware LLC:
$250. “Although Limited Partnerships, Limited Liability Companies and General Partnerships formed in the State of Delaware do not file an annual report, they are required to pay an annual tax of $250.00. Taxes for these entities are to be received no later than June 1st of each year.” http://www.corp.delaware.gov/howtoform.shtml
A transfer into an ERISA qualified retirement plan cannot be set aside by a creditor.
The origin of the modern American law governing fraudulent conveyances is the Statute of Elizabeth of 1571.