Now, once you get the letter (and you think through the horrible possibility of losing your hard earned money) you may be tempted to transfer your assets out of your name. I find folks may not know a lot of asset protection strategies, but they know if there’s a problem and they lose a lawsuit, the assets can be seized.
But there are two problems with moving the assets out of your name. First, who do you transfer them to? Second, will your creditor have a chance to still get them?
If you transfer the assets to someone else’s name, you will lose control of the assets. You cannot force that person to give the assets back to you. That person is the owner and can do what they want with the assets. And that person may have their own lawsuit, bankruptcy, IRS problem, death or divorce.
Even if that person doesn’t lose them and does give them back, will anyone be able to challenge that?
This is a good time to share with you our two rules of asset protection.
RULE ONE: No Lying.
RULE TWO: Never Lose Control.
Giving the assets to another person violates the second rule that you should never lose control of your assets. Wealthy folks never have a problem with this rule. They get it and live by it. We find it’s the folks just earning their first $100,000-$200,000 that seem to think it’s OK to move assets to another human. Don’t.
Giving the assets to another person it is easy for your creditors to challenge the transfer under the Fraudulent Transfer Statutes. In fact, the only thing that creditors can use to fight your asset protection planning is the Fraudulent Transfer rules. But it’s a powerful tool they can use.
The Fraudulent Transfer rules, although they vary from state to state, essentially give the creditor the right to take the assets from your mother (or whomever you transferred the assets to) if the creditor can show either that (1) the transfer was a gift that left you insolvent (this is the objective test) or (2) the transfer was made with the intent to hinder, delay or defraud your creditors (this is the subjective test). The creditor only has to prove one of these–and it’s fairly easy to do. So the real question: how long does the creditor have to bring a fraudulent transfer claim against you?
Answer: at least FOUR YEARS. In some states they have at least SIX to SEVEN YEARS. So, even if your mother doesn’t lose your assets, she can be issued a subpoena, hauled into court and forced to turn over all the assets to your creditor–even if she spent your money. Once again, don’t give it to a human.
So, what if you transfer it to a corporation? Or an LLC? Or your church? Or to a trust? Or to some other entity? Well, you may have more control over that asset, but you still must wait at least four years before it’s out of reach of your creditors.
UNLESS you transfer it to the Nevada Asset Protection Trust.
In Nevada Revised Statutes 166, the legislature clearly states that the fraudulent transfer window can be reduced to no more than TWO YEARS.
Plus, you get to retain significant strategies that can help you retain control over the assets.
Gary has published an ebook explaining in more depth how the Nevada Asset Protection Trust operates. If you would like a copy, please fill out the form with your email and we’d be happy to email it to you. You can also find many common questions about the Nevada Asset Protection Trust on our FAQ page.