We are made wise not by the recollection of our past, but by the responsibility for our future. George Bernard Shaw
A smart man makes a mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether. Roy H. Williams
I don't have to worry about creditors taking my assets; I have no property in my name!
This an often heard quote in legal practice when clients are hoping to avoid losing money or property to creditors. There appears to be a general belief is that you place your car or your home in your relatives name, you won’t lose it to a creditor that may sue you. Sometimes people transfer an asset to a friend or family member when they fear that they may be denied a benefit that they need, but they have too many assets to qualify, like Medicaid. There are a few problems with this approach:
Obviously, the relative may prove unscrupulous and keep the asset or sell the asset. If you have transferred title absolutely by deed (for real estate) or Bill of Sale (for personal property), your relative could sell or transfer the asset before you knew what was happening. This would leave you the difficult task of trying to set aside the transfer in Court and maybe compensating the innocent purchaser by paying what he or she paid to buy the asset.
If the relative doesn’t protect or care for the asset, you could lose it. For instance, if the relative doesn’t insure the asset, you may not be able to replace it, if it is damaged or stolen. You may not be able to obtain or afford the insurance on the asset if you can’t show legal ownership in your name.
The transfer to friends or family may not prevent the creditor from reaching the asset in the hands of the transferee or recipient of the asset. Oregon and many states have adopted the Uniform Fraudulent Conveyance Act (UFTA) ORS 95.200. Under the UFTA, any transfer done with the actual intent to hinder delay or defraud creditors is invalid and may be set aside by a Court at the request of the injured creditor. Any transfer where the debtor receives less than substantially equivalent value may be presumed fraudulent. Likewise, if the debtor transfers the asset at a time when he/she is insolvent, i.e. unable to pay one’s debts, the transfer may also be presumed fraudulent. The UFTA has a statute of limitations of 4 years that allows the creditor to look back to previous supposed valid transfers and have them set aside.
Sometimes the debtor is a soon to be incapacitated person whom other family members hope to protect from themselves or others by having the debtor convey or transfer assets to the family member. Unfortunately these transfers are often easily set aside by a subsequently court appointed Conservator who can show that the transfers were made when the debtor was incompetent.
While we’re on the subject of seniors, often an ailing person who may have to go into a nursing home, suddenly becomes aware of the high cost of care. Although they have planned to pass on their estate to their children and grandchildren, now they must use some or all of it to pay for their care. Then someone tells them about Medicaid and the necessity be impoverished to qualify. The ailing senior will often try to put property in a family members name or make it an outright gift. After all they were going to give it to them in their will anyway. Why should the government get it! Don’t they pay tax money for this sort of thing? Unfortunately, the transfer will disqualify them for Medicaid because of the 60 month Medicaid lookback period. The Medicaid worker divides the value of the asset by the monthly cost of the nursing facility and the result is the number of months before the ailing senior will be qualified for Medicaid. Things may get worse for the senior if the transferee child refuses to give back the asset or use it for the benefit of the senior when the Medicaid worker delivers the bad news.
So, as you can see, do-it-yourself credit protection fixes can easily backfire. If you desire to protect your assets from creditors, there are sound legal ways of doing so. Give me a call today (503) 363-7334 to learn how to protect your assets for the use of yourself and your loved ones.
