Transfer of Assets

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Transfer of Assets

The conveyance of something of value from one person, place, or situation to another.

The law recognizes that persons are generally entitled to transfer their assets to whomever they wish and for whatever reason. The most common means of transfer are wills, trusts, and gifts. Increasingly, however, persons are transferring property and money in order to qualify for government-funded nursing care or to avoid paying creditors or the Internal Revenue Service. State and federal laws prohibit transfers that defraud creditors, however. If a creditor can show that a transfer was made in bad faith and for the purpose of avoiding a lawful debt, the transfer will be voided.

A will is a common way of transferring assets. The testator, the person writing and signing the will, states in writing how the assets of his estate shall be divided and transferred upon his death. The estate of the testator is subject to inheritance taxes, but the remainder is transferred to the heirs and beneficiaries in the will. If a person dies intestate, without writing a will, state statutes direct how the assets shall be divided and transferred among family members.

For persons who have substantial assets, the transfer may be accomplished by using a trust. There are many types of trusts, some of which are part of a will and go into effect upon the death of the testator. Instead of being transferred directly to persons, the assets are transferred to a trustee, who distributes funds based on the terms in the trust documents. The use of a trust generally reduces inheritance taxes. A person may also transfer assets to a trust while living to reduce her Income Tax burden. Income earned by the trust will be taxed to the trust, which usually is in a lower tax bracket than the person transferring the assets. The trust must benefit others, however, not just the person transferring the assets.

Living persons may also make gifts to others. An inter vivos gift, which takes effect during the lifetime of the donor and the donee, is irrevocable when made. Federal tax law permits a person to give up to $10,000 yearly to each recipient without having to pay any gift tax or file a gift tax return. All gifts in excess of the annual exclusions are taxable.

Other types of transfers of assets have also become popular in the United States. Some middle-class older persons, faced with the high cost of nursing home care and wanting to leave their property to their children, transfer all their assets to their children. By doing so, the older person can meet income and net asset guidelines to qualify for government-subsidized nursing home care. State and federal governments have sought to prevent this practice because it takes funds away from those who are truly indigent.

A growing trend is transferring assets to avoid paying court judgments. Companies offer "asset-protection plans" that seek to insulate, for example, a doctor from the possibility of paying a large Malpractice damages award. By transferring assets to a foreign country, the plan makes it difficult to ascertain the amount of the doctor's assets. Also, collecting on a judgment in a foreign court is often impossible.

A more radical device is transferring assets outside the United States to a foreign trust, which manages the assets and distributes funds to the beneficiaries. The foreign trustee controls the assets and is not subject to a lawsuit seeking collection of a judgment against the transferee. Critics charge that besides allowing a person to avoid paying a debt, foreign trusts encourage income Tax Evasion. Defenders of asset protection contend that the purpose of foreign trusts is to avoid lawsuits, not taxes.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
In order to determine the actual sphere of legal operations through which a transfer of assets can be performed, we shall use the fiscal meaning of transfer, namely: the sale, assignment or alienation of the ownership right, the exchange of an ownership right for services or another ownership right and the transfer of the fiduciary assets and liabilities within the fiduciary operation according to the Civil Code (8).
However, rather than curtailing such "crisis" asset protection planning altogether, the DRA, by default, made available planning via a "note and loan." The DRA calls for the inclusion of funds used to purchase certain notes and loans as "assets" with respect to transfer of asset penalties unless the note or loan: (1) has a repayment term that is actuarially sound; (2) provides for payments to be made in equal amounts during the term of the loan, with no deferral or balloon payments; and (3) prohibits the cancellation of the balance upon the death of the lender.
* The individual had received nothing for the transfer of assets because before and after the transfer he owned 100% of the corporation.
The panel also basically approved a plan outlining reforms on the gift tax and the inheritance tax aimed at promoting transfer of assets from the older generation to the younger generation.
He added that the transfer of assets and liabilities, estimated at US$254 million, was seamless, even though no strategic partner has been identified to date.
* Gains and losses on the transfer of assets from the general account to a separate account
Levychin says $400 per hour is reasonable for a tax attorney, with succession plans requiring anywhere from two hours for a simple transfer of assets to an heir, to more than 10 hours for something more complicated such as setting up a trust for heirs with their equity stake distributed in intervals.
The transfer of assets is in compensation of a Rp16.55 trillion debt of the company group to the government under the Master of Restructuring Agreement (MIRA) signed by the company and IBRA.
"Always confirm payments or transfer of assets, even by fax."
This law criminalized the transfer of assets for the purpose of qualifying for Medicaid.
In 1996 it enacted criminal sanctions for the transfer of assets with the intent of qualifying for Medicaid to cover long-term care costs.
In addition, the transfer of assets to a limited liability company will not affect the liability of individuals for existing debt.

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