Under the Uniform Fraudulent Transfer Act you would be committing a crime, see Section 19.40.041:
"...(a) a transfer made or obligation incurred by a debtor is
fraudulent as to a creditor whether the creditor's claim arose before
or after the transfer was made or the obligation was incurred, if the
debtor made the transfer or incurred the obligation: (1) with
actual intent to hinder, delay, or defraud any creditor of the
debtor..."
WHAT IS FRAUDULENT CONVEYANCE?
Fraudulent conveyance has to do with transferring assets at less than
the "fair cash value" thereby defrauding a potential creditor or the
intentional divesting of assets which become unavailable for
satisfaction of the creditor's claims. Fair cash value means cash or
near cash value at the time of transfer, not the price you paid for the
asset.
For example, you transfer your portion of your equity in your home to
your wife for $200.00 and the fair cash value of your portion of the
equity was $250,000 (total value of the home was $500,000) or you
transfer title to your Mercedes to your brother for $100.00.
Additionally the IRS would claim that such a transfer is a gift subject
to a gift tax return and assess a penalty for the non-filing of Form
709 (PDF) United States Gift (and Generation-Skipping Transfer) Tax
Return.
WHAT IS CIVIL CONSPIRACY?
The "civil conspiracy theory" has been defined by the courts as (1) an
agreement (2) by two or more persons (3) to perform overt act(s) (4) in
furtherance of the agreement or conspiracy (5) to accomplish an
unlawful purpose or a lawful purpose by unlawful means (6) causing
injury to another.
To be convincing, the creditor must allege not only the conspirators
committed the act but also the act was tortious in nature. The
conspiracy alone is not enough to trigger a claim for civil conspiracy
without the underlying tort. Lately, however, advisors have been
dragged into the creditor claims as co-conspirators for suggesting and
implementing everyday common asset protection strategies. This has made
me more cautious, making sure that I don't get dragged in to my own
legal nightmare.
EXAMPLE OF SINGLE MEMBER LLC MEMBERSHIP UNITS AND SHARES IN A PUBLIC STOCK
SINGLE MEMBER LLCs should be avoided. The example I can use is
this: If you own 1,000 shares of General Motors it's considered a
personal asset subject to a creditor claim. If the claim is perfected
by litigation in favor of the creditor the owner of the 1,000 shares of
General Motors will have to transfer those shares to the creditor in
satisfaction of his claim. Owning single member units of an LLC is not
any different. The Owner of the LLC membership units is equivalent to
owning the 1,000 shares of General Motors and therefore subject to a
perfected creditor claim.
ASSET PROTECTION: PLACING TITLE OF ASSETS IN ANOTHER LEGAL ENTITY
THE CONCEPT OF ASSET PROTECTION includes the possibility of placing
title in certain assets in the name of a less vulnerable spouse or
other family members, or a legal entity. One should be very attentive
in transferring title without an open invitation to a "fraudulent
transfer" claim against the asset transferred or the possibility of
death by the spouse or family member, or possible dissolution of the
marriage, or a court judgment.
The most common methods of holding assets by INDIVIDUALS:
· Joint Tenancy
· Joint Tenancy with right of survivorship
· Tenants in Common
· Tenancy by the Entirety
· Community Property
LEGAL ENTITIES (Artificial person created by application of law):
· General Partnership
· Limited Partnership
· Limited Liability Company
· Corporation under Chapter "C"
· Corporation under Sub Chapter "S"
· Revocable Trust (There are many Revocable Trust variations, since a Trust is nothing more than a Contract)
· Irrevocable Trust (There are many Irrevocable Trust variations, since a Trust is nothing more than a Contract)
To learn more about avoiding fraudulent conveyance rules and how to
avoid civil conspiracy theories when repositioning assets and
implementation of precise asset protection systems speak with an
experienced and knowledgeable financial planner and advisor in these
matters such as Estate Street Partners offering free initial
consultations.
I always caution against simply speaking with only an attorney and only
an accountant in complex financial planning with regards to single
member LLC scenarios, partnerships in Limited Liability Company
formations, regulations surrounding fraudulent conveyance and civil
conspiracy and asset protection. It's best to develop or consult with a
group or team consisting of an attorney, accountant and financial
planner or advisor to offer you the best, well-rounded protection. You
will gain a more thorough understanding of the nature of asset
protection from LLC formations to avoid fraudulent conveyance and civil
conspiracy judgments.
Rocco and his team of bonded professional attorneys, CPAs and
accountants help affluent individuals and companies retain control of
their domestic and foreign/offshore assets, protect their assets, build
& preserve their wealth and financially structure their money to
reduce capital gains taxes, estate taxes, inheritance taxes, avoid the
probate process and decrease income taxes.
--------------------------------------------------------------------------------
Rocco Beatrice, CPA, MST, MBA, Award-winning trust & estate-planning expert
71 Commercial Street #150 Boston, MA 02109 tel: 508.429.0011 fax: 508.429.3034
Click here for more info: http://www.UltraTrust.com, http://ultratrust.com/single-member-llc.html
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
