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

Constructive fraud requires no proof of intent—the creditor need only show the debtor was insolvent (or became insolvent) and did not receive reasonably equivalent value for the transfer.

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

The core benefit of an OAPT is that a foreign trustee in a jurisdiction like the Cook Islands or Nevis is not subject to U.S. court jurisdiction and cannot be compelled to repatriate assets.

Question 3

ERISA protects retirement plan assets primarily by:

Accepted Answer

Preempting state law and shielding plan assets from most creditor attachments

Answer

ERISA preempts state law and contains an anti-alienation provision that prevents creditors from attaching or garnishing qualified retirement plan assets.

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

Reverse piercing occurs when a party (often the owner or a court acting on the owner's behalf) seeks to collapse the distinction between the owner and entity in the owner's favor, or when a creditor uses the owner's control over the entity to reach entity assets.

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

Cash-value life insurance (whole life, universal life) policies are protected from creditors in most states, especially when beneficiaries are named, because the cash value and death benefit are statutorily exempt.

APP - Asset Protection Professional Certification Practice Test

APP - Asset Protection Professional Certification Practice Test

APP Litigation and Creditor Protection Strategies 3