If you make any transfers at this point, either of the rental property or your "personal" savings you may be making a "fraudulent transfer". A fraudulent transfer can be unwound or essentially ignored by a court seeking to enforce a judgment against you. A fraudulent transfer has nothing to do with "fraud" in the traditional scene. A fraudulent transfer is a transfer made with the intent of preventing a judgement creditor (in this case possibly your tenant), from reaching your assets. It is a objective/subjective test. Did a transfer occur? That is purely objective test. Was the transfer made with the intent to prevent a creditor from reaching your assets? That one is more subjective, but if the transfer occurs after you become aware that a claim has or is likely to be made against you the court can presume that you intended to frustrate that person's judgement against you.
Not all is lost (1) your tenant may not win his/her suit; (2) you may be able to legitimately transfer some assets, and avoid a fraudulent transfer by use of a strategy called a "carve out". In a carve out essentially, you make an amount that your tenant might reasonably claim available to that person only. In this way you are not attempting to avoid that particular claim, and accordingly are not making fraudulent transfers. (3) As attorney Deland pointed out, at a minimum take this event as an opportunity to examine your entire risk profile. Even if you loose to this creditor, perhaps you can avoid a loss to a future car accident or slip and fall, employee suit, etc.
I also agree that if you determine that you do want to protect some assets that a domestic asset protection trust created in an appropriate jurisdiction such as Nevada or Wyoming, or international trust created in Nevis or the Cook Isands (sometimes called an "offshore" trust) will generally provide more protection than an LLC, particularly a single member LLC. You can include the carve out instructions in the trust, making certain assets available to this claimant, but to no others.
As attorney Hammarlund suggested you really need to contact an attorney who is experienced with asset protection laws, asset protection trusts, and the details fraudulent transfers before taking ANY action. This is not an intuitive area of the law and you need to assure you are well advised.
Legal Disclaimer: The comment provided above is intended as general information and is NOT legal advice. You should consult an attorney for advice regarding your individual situation. If your question concerns Estate Planning, Business Planning, Asset Protection, Elder Law, Long Term Care Planning, or matters governed by the laws of Massachusetts or Connecticut, you may contact me for a consultation at firstname.lastname@example.org or 413-527-0517.
See my other answer.
Do you want accurate, personalized, legal advice that you can rely on? You will have to hire an attorney, not ask on Avvo. I am not your attorney and am not creating an attorney-client relationship by this post. I am therefore giving only general advice. This advice may not apply to you or your situation; may not take account of all possibilities, and may not match the advice I would give to a client. DO NOT rely on this advice or any other advice on Avvo to make your legal decisions. If you want an answer to a legal question you should retain an attorney who is licensed in your state.
You have had a good scare. You may have realized that owning real estate can be dangerous to your financial health.
However, the good news is that you may be able to do something to protect the rest of your assets, if not from this particular lawsuit, than from others in the future. Have you filed a homestead? Do you have adequate insurance?
If you are considering transferring the property in order to avoid future liabilities, I would recommend an I.G.A.P., (Irrevocable Grantor Asset Protection Trust) rather than an LLC. An LLC costs $500 a year in annual fees to the state, and a single person LLC does not give a lot of asset protection. A court can simply ignore it. The LLC interest itself can be an asset vulnerable to seizure, and, of course, a plaintiff can simply sue the LLC, along with suing you personally for negligence. The I.G.A.P. trust, if it is set up properly, may do a better job of protecting the property itself, even from a direct suit against the trustee.
This might be a good time to consider getting your financial house in order generally, reviewing your assets, risks and insurance. This could be part of an overall estate plan that would include I.G.A.P trust planning. (If your attorney is not familiar with the I.G.A.P. Trust terminology, ask if an I.I.O.T. ( Irrevocable Income Only Trust) would suit your needs - that is another name for the I.G.A.P. Trust.
And of course, you are welcome to attend my Seminar, linked below. I will be discussing the I.G.A.P. Trust as a Medicaid planning tool, but I will touch on the way it works for general asset protection as well.
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