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Transferring Assets to Your Spouse

An article that was recently written by an Asset Protection foundation has warned lawsuit-prone professionals (especially doctors), not to transfer their homes and other personal assets into their spouses' names in order to protect themselves from lawsuits. The article strongly stated that not only does this kind of strategy fail to provide protection from lawsuits, but it can even be the basis for fraud if it is not done according to specific guidelines.

This warning came as legal consultants throughout the U.S. reported the continuing misconception, especially in the medical community, that transferring assets in the name of the less-vulnerable spouse is an effective asset protection strategy. Estate planners have estimated that 20 - 30% of the nation's medical doctors have engaged in this practice.

One asset protection specialist said that he blamed "the nation's lawyers who often give this advice without understanding its implications." He cited both the Uniform Fraudulent Transfers and Uniform Fraudulent Conveyances Acts, which state that courts can consider family relationships in lawsuit proceedings. These statutes explicitly says that transferring family assets to immediate family members is considered to be fraudulent if it is done as a reaction to a lawsuit. Even if the transfer is done before a lawsuit, the courts may find the arrangement as an implicit attempt to defraud creditors.

The secondary reason for this warning included complicated divorce proceedings, increased estate and property tax liabilities, and the possibility of non-physician spouses being sued independently.

The states of Texas, Florida, Kansas, Iowa, Oklahoma and South Dakota have universal Homestead Exemption laws protecting homeowners' residences from being seized in lawsuits. However, Homestead Exemption laws in 39 other states are said to be woefully inadequate for 21st Century housing prices, with the majority protecting between $10-50,000 of equity in a homeowner's primary residence.

It's recommended that professionals who may be at risk of losing their homes in medical/dental malpractice lawsuits consider alternative forms of titling their assets, including Limited Liability Companies, Family Limited Partnerships and Trusts.