As with many things, people often see a solution to an immediate issue but do not evaluate the entire set of circumstances to see what other problems might arise or what other long term ramifications there are for such immediate solution. In any form of asset protection, control over the asset is a valid concern and remains one of the trickier points. In the event of transferring an asset to another party where they take outright title and control, the asset effectively becomes their property whether it is through a gift or some other form of transfer. The transferor effectively loses this asset, just as if a creditor won a lawsuit, got a judgment and was able to foreclose upon the asset.
There are many strategies which involve a private transfer where the equity and ownership might vest in another party whether it is a spouse, child or other family member, but the former owner or transferor will retain some level of management, control and possibly income. The key is to structure the transfer so it is done in a proper and legal way which accurately reflects the intent of the parties and protects the asset from creditors.
Additionally, if there is an action or claim pending, and a transfer is made, whether it is to a spouse, child or friendly third party, the creditor could still reach the transferred property under a claim that the transfer was made fraudulently in an attempt to defraud creditors.
When transferring property, this is one of the factors that makes proper asset protection plans very tricky. Transfers must not only be carried out properly in structure, but also from the transactional viewpoint as to how and why the assets being transferred arrived at that destination.
Additionally, transfer of an asset to a spouse can bring potential questions and problems under matrimonial law, especially if there is no pre-nuptial agreement or a divorce. State laws also affect this very heavily. So, transfers to spouses where outright ownership is transferred should not be entered into without analyzing the potential consequences should the spouse become an adversarial party through separation or divorce..
Need to transfer some assets? Be sure to review your options with your attorney to be sure that you are truly protecting the asset and not leaving the asset vulnerable to creditors.