• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Law Offices of Kobrick and Moccia

Long Island Estate Planning Attorneys

ESTATE, TRUST PLANNING &
ELDER LAW INFORMATION CENTER

Call Now: (800) 295.1917

  • Attend Our Free Webinars
  • Home
  • Our Firm
    • About Our Firm
    • Client Testimonials
    • Meet Our Team
  • Services
    • Blended Family Planning
    • Elder Law
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration
  • Elder Law
    • Coping With Alzheimer’s
    • Guardianship
    • Medicaid Planning
    • Nursing Home Planning
  • Resources
    • Articles
    • Elder Law Resources
      • Commack Elder Law
      • Elder Law Reports
      • Harrison Elder Law
      • Hauppauge Elder Law
      • Rockville Centre Elder Law
      • White Plains Elder Law
    • Estate Planning Definitions
    • FREE Estate Planning Worksheet
    • FREE Seminars
    • Frequently Asked Questions
      • Elder Law
      • Estate Planning
      • Families Without an Estate Plan
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Medicaid
      • Probate
      • Trust Administration
      • Trust Administration & Probate
      • Wills and Trusts
    • Is My Estate Plan Outdated?
    • Legacy Wealth Planning Consultation Form
    • Medicaid Resources
    • Probate Resources
      • Harrison Probate
      • Hauppauge Probate
      • Long Island Probate
    • Probate Checklist
    • Special Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
    • Top Estate Planning Techniques
  • Communities We Serve
    • Nassau County
      • Garden City
      • Lynbrook
      • Malverne
      • Rockville Centre
    • Suffolk County
      • Commack
      • Dix Hills
      • Hauppauge
      • Nesconset
      • Smithtown
    • Westchester County
      • Harrison
      • Mamaroneck
      • Rye Brook
      • White Plains
  • Webinars
  • BLOG
  • Reviews
    • Our Reviews
    • Review Us
  • Contact Us
Home » Estate Planning » Basics of Estate Planning: Asset Protection

Basics of Estate Planning: Asset Protection

January 10, 2019 by Anthony Moccia

Blog Author: Stephen C. Hartnett, J.D., LL.M. (Tax), Director of Education, American Academy of Estate Planning Attorneys, Inc.

This is another in a series of blogs on the basics of estate planning. This week, we’ll take a look at asset protection.

Much depends upon whose assets you are looking to protect. If the assets are those that are coming to you, the debtor, then typically, those can be protected completely.

The debtor could protect their own assets in three general ways: 1) insuring against the risk, 2) shifting the assets into categories protected under state law or federal bankruptcy law, or 3) shifting the assets to someone or an entity where the creditor cannot attach.

Whenever the creditor is looking to protect their own assets, especially by shifting them to someone else, the threshold question is whether it is a fraudulent transfer. A transfer may be deemed to be fraudulent based on various badges of fraud:

  1. Transfer to an insider
  2. Debtor retained possession of the property after the transfer
  3. Transfer was concealed
  4. Debtor was sued or threatened to be sued prior to the transfer
  5. Transfer was of substantially all assets
  6. Debtor absconded
  7. Debtor concealed assets
  8. Inadequate consideration
  9. Debtor was insolvent or became insolvent shortly after the transfer
  10. Transfer occurred shortly before or after substantial debtor was incurred
  11. Debtor transferred the assets to a lienor who transferred the assets to an insider of the debtor

These badges of fraud are found in common law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfers Act, or the Bankruptcy Code. While the badges of fraud underlie each of these, they each have their own spin on the concept.

Assuming it is not a fraudulent transfer based on the laws of the jurisdiction, the debtor is free to engage in asset protection planning, including transferring the assets to others.

There is no panacea or solution for every circumstance. But, here are a few strategies and some of their pros and cons:

    • Liability Insurance. I’m listing this first since it is often forgotten. Clients often have insurance for their home and auto. But, often, clients do not have an umbrella policy or other liability insurance, other than as a driver. An umbrella policy is often a very inexpensive way to insure against many risks. However, it is limited to liability from certain activities.

 

    • Gifting Assets. You can gift assets to family members, such as your spouse, and remove those assets from the reach of your future creditors. Such a transfer is irrevocable and you cannot force a return of these assets. The transfer could be problematic in the event of a divorce.

 

    • “Tenancy by the entirety.” Tenancy by the entirety is a form of joint tenancy, only available between married couples, which is available in about half the states. In most states with tenancy by the entirety, both real property (like a house) and personal property (like a brokerage account) may be held in that form. In about 1/3 of the states with tenancy by the entirety, it is only available for real estate. With tenancy by the entirety, a creditor of one spouse cannot attach the property. However, a creditor of both spouses, like someone who slips on the sidewalk of the home held in tenancy by the entirety, could reach the asset. The tenancy by the entirety form ends at the death of the first spouse. If the spouse with creditors is the survivor, that spouse receives the property by operation of law and it is no longer protected from their creditors due to tenancy by the entirety.

 

    • 529 plans. Assets deposited into a 529 plan for children, stepchildren, grandchildren, and step-grandchildren may be protected in bankruptcy up to the maximum amount allowed for a 529 plan in your state, as long as the assets were deposited more than 2 years before a bankruptcy filing. For example, in California, the maximum for 529 plans is $475,000 per beneficiary. The account owner can still withdraw these funds and use them for themselves. So, this could be a way to shield a large sum if you think ahead. However, investments options may be limited and there may be negative income tax consequences if the funds are not used for higher education.

 

    • 401k or retirement plans. Assets you contribute to a retirement plan, including the growth thereon is exempt in bankruptcy. These can be great ways to shelter assets from creditors. Withdrawals may face a 10% early withdrawal penalty if made before age 59 ½. Amounts withdrawn would be includible in your taxable income if from traditional accounts. Similar rules apply to IRAs but they may only be protected up to $1 million, depending upon the circumstances.

 

  • Irrevocable Trust. An Irrevocable Trust can be used to protect assets from future creditors. In most states, you cannot be a beneficiary of such a trust and obtain asset protection. The assets transferred to such a trust are transferred irrevocably from you and you cannot get them back.

There are many ways to protect your assets from creditors. The key is thinking far in advance and structuring your assets to protect them, years before any creditor surfaces.

In upcoming blogs, I’ll discuss more on the basics of estate planning.

  • Author
  • Recent Posts
Anthony Moccia
Anthony Moccia
Anthony Moccia is an attorney and partner at The Law Offices of Kobrick & Moccia.His practice focuses on estate planning and elder law.He is a member of the New York State and Nassau County Bar Associations.He frequently presents free seminars on wills & living trusts to area residents and his seminars are said to be “informative, entertaining & easy to understand.”
Anthony Moccia
Latest posts by Anthony Moccia (see all)
  • “Last Will and Testament” Origin - April 1, 2021
  • Do I Need a “Durable” Power of Attorney? - April 2, 2020
  • Joint Tenancy Pros and Cons - March 31, 2020

Filed Under: Estate Planning, Legal Education

Other Articles You May Find Useful

“Last Will and Testament” Origin
Joint Tenancy Pros and Cons
Joint Tenancy Pros and Cons
Planning for the Sandwich Generation
Planning for the Sandwich Generation
Best-Places-to-Retire-State
Best Places to Retire: State Taxation
men writing on paper
Whom Do You Want to Get Your Assets?
men writing on paper
Beneficiary Designations and Other Non-Probate Transfers

Primary Sidebar

Law Offices of Kobrick and Moccia

Download our free estate planning worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • LinkedIn
  • RSS
  • Twitter

Blog Subscription

  • This field is for validation purposes and should be left unchanged.

GARDEN CITY

1305 Franklin Avenue Suite 170
Garden City, NY 11530
United States (US)
Phone: (516) 248-9500
Fax: (516) 248-7606

HAUPPAUGE

150 Motor Parkway Suite 401 (Regus)
Hauppauge, NY 11788
United States (US)
Phone: (631) 941-3400
Fax: (516) 248-7606

HARRISON

600 Mamaroneck Avenue, 4th Floor
Harrison, NY 10528
United States (US)
Phone: (914) 701-0777
Fax: (516) 248-7606

MAP

kobrick_sidbr_map

Office Hours

Monday9:00 AM - 5:00 PM
Tuesday9:00 AM - 5:00 PM
Wednesday9:00 AM - 5:00 PM
Thursday9:00 AM - 5:00 PM
Friday9:00 AM - 5:00 PM

Footer

footer-logo
  • Facebook
  • LinkedIn
  • Twitter

The information on this Attorneys & Lawyers / Law Firm website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. The information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.

Kobrick and Moccia, Attorneys at Law. Privacy Policy | Contact Us | Disclaimer | Site Map | Powered by American Academy of Estate Planning Attorneys

Law Offices of Kobrick and Moccia
Attorney Advertisement
© 2023 American Academy of Estate Planning Attorneys, Inc.