Forms of Asset Protection

  • Ownership by the Other Spouse–It is not uncommon for a spouse with high liability exposure to transfer assets to his or her spouse with a lower risk profile.
  • Tenancy by the Entirety (TBE)–TBE refers to assets titled in the name of husband and wife. A creditor of one spouse may not reach TBE property unless and until the non-debtor spouse dies or the TBE is severed by the divorce of the parties.
  • Retirement Assets–State law protects IRAs from the creditors. Federal law protects qualified plans such as 401(k)s. This protection applies to the account owners. Whether it extends to beneficiaries who inherit the accounts is an open question. According to the Supreme Court, the answer is no, at least in some cases.
  • Health Savings Accounts–As explained here, HSAs are exempt from creditors under state law. 
  • Limited Liability Companies (LLCs)–Under Tennessee law, a charging order is the “sole and exclusive remedy of a judgment creditor with respect to the judgment debtor’s membership interest or financial rights.”
  • Tenancy by the Entirety Trust (TBET)–A TBET allows spouses to obtain the benefits of control that a trust affords while still retaining the creditor protection of tenancy by the entirety ownership.
  • Spousal Lifetime Access Trust (SLAT)–This is the same concept as ownership by the other spouse, but in trust form.
  • Tennessee Investment Services Trust (TIST)–A TIST is a Tennessee domestic asset protection trust. More information about TISTs is here.

Posted by Joel D. Roettger, JD, LLM, EPLS

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