Transferring your assets to your spouse - or someone else
who is cooperative. There is an unlimited gift tax
exemption for transfers to a spouse.
2. Tenancy by
the Entireties. This is a type of joint tenancy between
married people for their residence. The creditors of one
spouse cannot levy on the residence as they can when it
is owned in an ordinary joint tenancy.
your assets into a form exempt from execution by judgment
creditors. A good example is a retirement plan or IRA (in
Illinois.) Another exempt asset is life insurance payable
to a spouse or dependant, including the cash value.
(Creditors can levy on distributions from these plans or
your assets in limited partnerships or LLC's created
under the laws of a few states where the creditors can
get only a charging order (a right to get distributions
from the entity) rather than an order to sell the
ownership interest. You can get the money out in salary -
not distributions on the ownership interest.
5. Trusts in
general. An irrevocable trust (for someone else's
benefit) puts assets in it (but not distributions) beyond
the claim of your creditors. A revocable trust that
provides how its assets are distributed after your death
protects the assets from your (not the beneficiary's)
creditor's claims after your death - but not
trusts. These are trusts that do not allow a creditor of
a beneficiary to attach the beneficiary's interests. They
are valid, but only if the beneficiary is someone other
than the creator of the trust.
irrevocable asset protection trusts are now permissible
in several states. In effect they are spendthrift trusts
for the benefit of the creator of the trust. They
basically provide that a creditor of the grantor cannot
get the trust assets. Illinois has no such law. To have
the law of one of these other states apply to a trust set
up by an Illinois resident that state must have a
substantial relationship to the trust such as a trustee
being in that state and/or location of the assets there.
Since domestic asset protection trusts are new, certain
questions, such as what state's laws will apply, are not
asset protection trusts. Some countries don't grant "full
faith and credit" to a foreign judgment. A creditor
having a U.S. judgment cannot enforce it in those
countries. The creditor must institute a new law suit
there. This alone discourages creditors. If a creditor
does sue the trust assets can be distributed to another
trust in another country with similar laws before the
creditor gets judgment.
liability entities. These are corporations, limited
liability companies, limited partnerships and limited
liability partnerships. If these are set up and operated
properly creditors of the business can only get the
business assets. They cannot go outside the business and
collect from assets of the owners. Note that creditors of
the owners can get the owner's interests in the
corporation or partnership and to some degree, the
limited partnership and limited liability
ownership of assets used by a business outside the
business. The creditors of a business can get its assets.
They cannot get assets it leases. For this reason owners
of assets like real estate used by businesses they own
often do not put the real estate in the entity owning the
business. They lease it to the entity. This goes for any
valuable asset and often includes equipment or other
things used by the business. If the asset is of a type
which can generate claims, then the asset can be owned by
another limited liability entity.
risks. If two businesses are conducted or a single
business is conducted in separate locations each can be
owned by a separate limited liability entity. That way if
one goes under the assets of the other will not be