Asset protection: keep your hand in the game.

• Author: McCullough, Scott M.
• Position: Legal Brief

The current economic crisis has created numerous horror stories about hard-earned wealth dissolving in an instant. Individuals and families once well-to-do are now seeking bankruptcy protection and trying to protect the assets they have accumulated.

It may be a builder over-extended in debt and unable to sell his inventory; a business owner whose personal assets are being sought by creditors; a doctor with higher insurance premiums to cover industry losses; a widow trying to preserve the proceeds of her deceased husband's life insurance policy; or an entrepreneur whose debts far exceed revenue. In many cases personal assets have been pledged as collateral to secure obligations that for these and a myriad of other reasons cannot be repaid.

Some think asset protection is "hiding" or "transferring" assets to relatives and friends and misrepresents the extent of personal holdings. Unfortunately, such terrible economic circumstances breed creative methods to protect or transfer assets from creditors. And many of these strategies are illegal, not to mention unethical, and can produce drastic consequences.

The Right Move

Most states, including Utah, have now adopted the Uniform Fraudulent Transfers Act (UFTA). According to UFTA, any transfer made without receiving reasonable equivalent value and with the intent to hinder, delay or defraud any person with a claim is fraudulent and may result in the court voiding the transfer; attaching to the property; enforcing an injunction against further disposition of property; or appointing a receiver to take charge of the assets. Moreover, transfers that include fraud, such as omitting assets from applications or lying under oath, may constitute criminal action and carry jail time.

Asset protection however, can be done in advance of any problems, legally and ethically with professional planning strategies. However, it must happen with lull disclosure and without intent to hinder, delay or defraud creditors.

The liability system that exists in the U.S. today is similar to a poker game, ruthlessly played. Individual entities are players at risk of losing their stakes in the game. The most dangerous players are, of course, those who have little to lose and everything to gain.

Invested chips are at risk and are often consumed in satisfaction of debt obligations, judgments, liens and other liability claims. Meanwhile, market factors serve as the unseen cards in the players hands, adding to the complexity and...