Most people who own high-value assets are eager to retain control of those resources indefinitely. They could potentially achieve that goal through asset protection planning. Otherwise, outside parties including creditors and people who file lawsuits could place liens against those assets or force their liquidation in a bid to demand repayment of a debt.
One of the strategies people use to avoid the forced liquidation involves transferring ownership of those assets. They might sometimes transfer them to friends or family. Other times they might create a trust to hold their assets and protect them from collection efforts or lawsuits. Yet, the law in Nevada does penalize transfers that are not made in good faith. Outside parties could potentially attempt to take legal action against an individual who transfers assets to other people, a business or a trust as a way of avoiding their financial obligations.
What constitutes fraudulent conveyance?
Fraudulent conveyance is the legal term for inappropriately transferring assets to prevent creditors from laying claim to them. Typically, the transfer has to occur after someone is aware of a legal or financial controversy.
The intent behind a fraudulent transfer is to avoid legal financial responsibility. Transfers made prior to taking on a debt or facing litigation are less subject to scrutiny. If someone facing a lawsuit moves many of their most valuable assets to a trust, transfers them to their small business or gifts them to family members, that could lead to claims of fraudulent conveyance.
What happens in cases involving fraudulent transfers?
If a creditor or a plaintiff in a lawsuit can convince the courts that a transfer was fraudulent, the courts may demand the reversal of the transfer. Such scenarios may lead to the person who transferred assets regaining control of them and then immediately losing them to credit or claims or facing a lean granted by the civil courts.
Additionally, the state could pursue misdemeanor charges against the person accused. They may serve up to 364 days in jail and may have to pay $2,000 in addition to whatever restitution they may have already had to offer their creditors. In fact, if the fraudulent transfer was to an outside person, the recipient of the transfer could also face lesser misdemeanor charges.
It is reasonable for people to try to protect their assets, possibly by creating a trust. They simply need to do so appropriately and within the confines of Nevada state law. Reviewing assets and concerns at length with a skilled legal team can help people establish an effective solution for preserving their resources. The sooner people take action, the less likely they will be facing allegations of fraudulent conveyance later.
