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Staten Island Fraudulent Transfers

One of the most important aspects of estate planning is preserving your estate for your future use or to pass on to your spouse, children, or other people or institutions. Unfortunately, unexpected events may happen throughout your life that could significantly impact the size of your estate. Such events often include a major illness that results in significant medical bills not covered by health insurance. You may lose your job, resulting in a lot of debt and little income. You may find that you have to go to a long-term care facility that has a substantial monthly fee. If anything occurs that will significantly impact your wealth, it is natural to want to do what you can to preserve it. The good news is that with careful planning, you may be able weather such events with a significant amount of your assets intact. However, without proper planning you may find yourself in deep financial difficulty, including being accused by your creditors of making a fraudulent transfer. The best way to protect your assets without winding up in a sticky financial and legal situation is to work closely with a qualified Staten Island Fraudulent Transfers Lawyer to ensure that your estate planning meets your financial goals and that it is free of any costly complications.

When is a fraudulent transfer?

A fraudulent transfer, also referred to as a fraudulent conveyance, occurs when you transfer assets in order to try to avoid paying a creditor who has the right to collect against those assets. For example, if instead of selling items for their fair market value and using the proceeds to pay your credit, you "sell" $10,000 with of assets to your spouse, cousin, or best friend for $500 in order to avoid paying your creditors.

Fraudulent transfers often occur when a person is experiencing financial difficulties and is contemplating filing for bankruptcy. During a bankruptcy, under the law the bankruptcy trustee has the right to seize certain assets of the debtor, sell them and use the proceeds to pay creditors. In order to avoid having an asset end up the hands of the bankruptcy trustee or creditor, some debtors sell or transfer ownership of property shortly prior to filing for bankruptcy. As a part of the bankruptcy process, the trustee will review recent sales and transfers of property that occurred to determine if they were fraudulent.

There are certain transfers that are almost always consider suspect. A transfer to an "insider" such as a relative or to a business partner would be considered suspect. If you are insolvent, a transfer would be suspect. If you transfer the asset for significantly less than its value, the transfer would be considered suspect. The rationale behind this is that it does not make sense for a person to sell something and not get a reasonable about of money for it. The transaction will look particularly suspect if you have very few assets and clearly could benefit from receiving a reasonable sum for the asset. In general, the court will look at the following factors:

  • Was the transaction was to an insider?
  • After the transaction, did you retain possession or control of the property?
  • Was the transaction concealed?
  • Before the transaction, did a creditor threaten you with a lawsuit?
  • Did the transaction include a substantial portion of your assets?
  • Did you run off after making the transfer?
  • Was the transaction for reasonably equivalent value?
  • Were you insolvent, or did the transaction cause you to be insolvent?
What are the consequences of fraudulent transfers?

A consequence of a fraudulent transfer may be that the court reverses the transaction. This is the likely consequence if the person who receives the property at issue in a fraudulent transfer is aware of the fraud. However, if the new owner of the property was unaware that you had creditors who had claims against your property, then the purchaser will be permitted to keep the property.

How do I effectively and legally protect my assets?

A sound asset protection plan that is a part of your overall estate plan can be an effective way to both protect assets from future creditors and avoid fraudulent transfer liability. While the law does not allow you to create an asset protection plan to evade current creditors, it is acceptable to create an asset protection plan to protect assets from future creditors. A future creditor may be an assisted living facility. With proper planning, instead of using your assets to pay for assisted living, Medicaid will pay for it. This is sometimes referred to as Medicaid planning.

An effective way to protect assets is by transferring assets to an irrevocable living trust. A trust agreement is an estate planning vehicle that holds property for the benefit of another person. To create a trust you as the grantor would transfer property into the trust. The trust then becomes the legal owner of the property. A living trust can be revocable or irrevocable. When you create an irrevocable trust you name someone else as the trustee. You cannot change the terms of the trust. It is permanent. Thus, you give up control over the assets. Because you give up ownership and control over the assets, your creditors cannot reach them. However, you are still able to enjoy the benefits of the assets. For example, you can name a family member as the beneficiary of the trust. This would enable you and your family to continue to benefit from the property without the property being legally owned by you.

A revocable trust, on the other hand, is not an effective estate planning to protect assets and avoid fraudulent transfers. With a revocable trust you are the trustee and have the authority to change or revoke the trust at any time. If you decide that the trust is no longer necessary, then you are free to dissolve it. With a revocable trust even though you transfer your assets to the trust, you still maintain a significant amount of control over the trust and the assets.

In order for an irrevocable trust to be an effective tool, the timing of when you set it up is critical. If you are on the verge of filing for bankruptcy and you create an irrevocable trust immediately prior to doing so, you may run into a fraudulent transfer problem.

To ensure that your assets are adequately protected and that you do not risk suffering the consequences of making a fraudulent transfer, it is important to contact an experienced New York City Fraudulent Transfers Lawyer. The staff at Stephen Bilkis & Associates, PLLC have extensive experiencing setting up comprehensive estate plans that include living trusts as well as wills and advanced health care directives. We will help you develop an overall estate plan that reflects your individual goals. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate plan.

Client Reviews
Mr. Bilkis handled both my father and mother's estate issues through very difficult times he was compassionate kind and understanding. In fact the whole firm showed great empathy. Despite the emotional hard time we were having that quickly and efficiently handle all the matters that were necessary to get us the result we desired. Can't recommend them enough. B.B.
From the very first phone call to Stephen Bilkis' office, the staff was extremely polite and helpful in assisting me. Mr. Bilkis was honest and upfront with me from the beginning in what he projected the outcome of my case would be; in the end we got better results than either of us anticipated. He was very genuine and compassionate in understanding my situation and how this legal matter could effect not only myself but my family as well. I highly recommend this law firm and will most definitely continue using them for any future legal needs. Jarrett
Stephen has handled numerous estate matters, criminal matters and family court matters effectively and with a goal-oriented approach. He gets great results and is a results-oriented attorney. Dustin