RELYING ON GIFTING TO RELATIVES AND FRIENDS (SEE ALSO FAILING TO ACT)
Transferring all of your assets to your spouse and/or children, especially after something has happened, will not protect your assets from a lawsuit. Even if it did protect those assets from your lawsuits, transferring your assets to your spouse and/or children opens up another Pandora’s Box.
Keeping in mind that there are thousands of lawsuits filed daily due to employment grievances, “slip and fall” and auto accidents, consider this scenario: Let’s suppose that you transfer all of your assets to your 18-year old son who causes an auto accident. Several other cars are involved in the accident and several injuries are incurred. Chances are high that the other parties will come looking for the driver with the deepest pockets. If your son “owns” your house and business, a sympathetic jury will undoubtedly take the possession away from your son in order to teach him a lesson for his reckless driving. The same holds true for spouses, parents and even friends.
Also, gifting is limited to about $13K annually, per spouse, per donee. Gifts over that amount must be documented with a gift tax return. Failing to do so will result in you having to answer the question, “Are you lying now re: the date and validity of this transfer or did you cheat the IRS?” A bad place to be in a time of need.
Here’s an article on how the IRS is cracking down on gift tax cheaters starting in 15 states, is yours one of them?
http://blog.lbhcpas.com/blog/bid/64304/Gift-tax-cheaters-beware
And an article on other COMMON FATAL FLAWS OF ASSET PROTECTION PLANNING:
http://www.proassetprotection.com/2010/10/common-fatal-flaws-of-asset-protection-planning/