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Property transfer to shield from claims?

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  #1  
Old 09-10-08, 01:46 PM
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Property transfer to shield from claims?

Hi folks.

A friend told me he doesn't worry about lawsuits against him now, as he put all his property (car, plane, house, boat, bank accounts, cash value of insurance, etc.) in his wife's name. He says that any suits against him would find him "penniless".

He flies as a private pilot, and is now flying "naked" (without liability insurance), as it was costing him $15K a year.

Is "shielding your property" really that easy? Put it all in your spouse's name only?

Ignoring issues like "his wife can leave him and take all the property ... because it's already his!" - is he legally "without property" and thus pretty much safe from lawsuit action?

thanks.
Tom
 
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  #2  
Old 09-10-08, 02:08 PM
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Well, first we know your friend is an idiot, does he drive w/o car insurance too? He must have read something on a website...lol

Does he work? Boom, all future wages garnished. Any sort of retirement income? Boom, garnished. Tax refunds, garnished.

Why would he worry about lawsuits in the first place?

His wife will be a happy camper in a few years...

Incorporating yourself can protect personal assets, but I don't think that includes things like residences (of course, if they are owned by the corporation, then they are corporate assets).

You can not pay income taxes too, just assert they are illegal taxation w/o representation. See ya in a few years.
 
  #3  
Old 09-17-08, 07:58 PM
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Putting assets in a corporation is typically done to put a veil between the shareholders and the corporate enterprise. If the corp hurts someone, it can be cleaned out to pay its liabilities, but, if properly set up and operated, that's all the plaintiffs or other corporate creditors can get (an exception would be where the shareholders demonstrated by their behavior that the corp was a mere extension of their pockets. Another would be where a shareholder guaranteed or cosigned a corporate note--happens with new corps w/o credit). So, if a fellow puts all his assets into a corp, then the corp hurts someone, he cans lose all those assets.

The normal scenario is that the fellow puts certain assets into the corp, but retains other assets, such as the real estate where his bar is located. The corp leases the real estate, but owns the liquor license, the inventory, equipment, good will, etc. If the corp gets sued, all the plaintiff can win is the inventory, license, equipment, good will, and such. Essentially, the plaintiff can own the corp if the claim is large enough. The catch: The corp may be of nominal value, after all, as it has no real estate, so it has to continue leasing the real estate at what is probably a healthy sum--often netting more money for the landlord than the bar ever could. Pretty tricky, you say? Yes. But there are pitfalls. A corp must be properly capitalized, managed, etc. (I won't go into that now, but there was a cab company in NY once that was the classic example of what not to do--did almost everything wrong, and a plaintiff pierced the corporate veil and got into the owner's personal assets.)

Keep in mind that while having a properly run corp holding your liability-producing stuff will tend to protect your assets which are not in that corp, if you personally run over a kid on the sidewalk, you will be the one sued, and your shares of that very corp will not be shielded from your creditors. If the claim is big enough, the plaintiff/creditors may get the corp, and everything in it.

So, a fellow makes himself judgment proof by putting everything in the wife's name. Pretty smart, but if the claim were big enough to justify not just buying liability insurance, some smart lawyer will look into where his money went, and he may be able to substantiate a claim that the transfers without value were steps taken in a scheme intended to defraud creditors. Where the transfers appear to have no other purpose, the wife's holding the assets just may not close the door to claimants.

Then, of course, if the wife has one too many beverages whilst celebrating her good fortune, slams into a school bus, and maims a mess of kids, well, her net worth may just dwindle to match that of her clever husband.
 
  #4  
Old 10-06-08, 10:27 PM
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Join Date: Mar 2007
Posts: 75
wife protection

I agree with the second last paragraph of creekwader. If you can somehow show that these transfers to his wife served no other purpose (like estate planning) this may constitute a fraudulent conveyance. A court in equity may let you go after the wife's assets in such a case. But this is tough to proof. And you would have to sue him.

Good Luck!
 
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