APP Litigation and Creditor Protection Strategies 3

Question 1

Which element must a creditor typically prove to establish a constructive (vs. actual) fraudulent transfer?

Accepted Answer

The debtor was insolvent at the time of transfer and received less than reasonably equivalent value

Answer

The debtor acted with specific intent to defraud

Answer

The transfer was made to a foreign jurisdiction

Answer

The debtor had a prior judgment entered against them

Question 2

Offshore asset protection trusts (OAPTs) are attractive primarily because:

Accepted Answer

Foreign trustees are not bound by U.S. court orders requiring return of assets

Answer

They are not subject to any U.S. tax reporting requirements

Answer

They eliminate the need for a U.S. attorney to draft the trust

Answer

They allow the grantor to retain direct control over trust assets

Question 3

ERISA protects retirement plan assets primarily by:

Accepted Answer

Preempting state law and shielding plan assets from most creditor attachments

Answer

Exempting them from all state income taxes upon distribution

Answer

Requiring trustees to purchase surety bonds equal to plan value

Answer

Limiting plan contributions to amounts below the creditor's claim

Question 4

What is 'reverse piercing' of the corporate veil?

Accepted Answer

An owner or insider seeking to hold the entity liable for the owner's personal obligations

Answer

A creditor suing the entity to reach the owner's personal assets

Answer

A court dissolving an LLC as a fraudulent instrument

Answer

The IRS disregarding a single-member LLC for tax purposes

Question 5

Which life insurance product typically provides the strongest creditor protection in most U.S. states?

Accepted Answer

Cash-value whole life insurance with designated beneficiaries

Answer

Term life insurance with a third-party beneficiary

Answer

Group employer-provided life insurance

Answer

Accidental death and dismemberment (AD&D) policies

Question 6

A 'spendthrift trust' protects a beneficiary's interest primarily by:

Accepted Answer

Restricting the beneficiary from transferring their interest and barring creditor attachment before distribution

Answer

Allowing the beneficiary to freely assign the trust interest to pay personal debts

Answer

Investing trust assets only in government bonds to prevent loss

Answer

Requiring court approval for every distribution made to the beneficiary

Question 7

Which strategy is considered the most important first step in legitimate asset protection planning?

Accepted Answer

Planning proactively before any claims, lawsuits, or threats exist

Answer

Transferring all assets to a foreign trust immediately upon facing a lawsuit

Answer

Converting non-exempt assets to cash and storing it offshore

Answer

Filing for bankruptcy to discharge all existing obligations