Oftentimes prospective clients will suggest that they transfer their assets to a relative as a gift and ask if this will protect the gifted assets. For example, a debtor who sells all of his assets to his brother for $1 or gives all of his assets to his spouse will likely see the transfer challenged as a fraudulent transfer. If it is determined that the transfer was made to defeat creditors either because the debtor was made insolvent by the transfer or because the debtor actually intended to defraud his creditors, courts can set aside the transaction. The person holding the assets may then be required to give them up to the creditor.
The concept of fraudulent transfers also applies to transfers to limited liability companies, limited partnerships, corporations and into various forms of joint ownership including tenants by the entirety. If such a transfer makes the debtor insolvent, the transfer may very well be a fraudulent transfer.
What is Asset Protection?
Limited Partnerships / Limited Liability Companies
Offshore Asset Protection Trusts
Tax Consequences of Offshore Trust