Are asset protection plans unethical or illegal?

No. The law provides that residents of California, as well as residents of other states, can hold property titled in many different forms. The law also allows spouses to transfer property between themselves, so long as they follow certain well defined procedures and methods. Holding property titled in one way, as opposed to another, has certain advantages when it comes to asset protection. Agreements to help protect your assets from creditor claims are just taking advantage of the legal rights available to individuals to hold title to property as they chose.

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What is a legal separation?

The term legal separation is misleading. In California, married couples are deemed separated when they are no longer planning on remaining a married couple, and at least one party has communicated this intention to the other party. It does not necessarily mean the parties are no longer living together, as many times couples remain in the same house for financial or other reasons. However, moving out is very good evidence of an abandonment of the marital relationship if the date of separation becomes a contested issue in court. Couples who are no longer living together, but still acting like a couple, or seeing a counselor are not considered separated because they have not abandoned the married relationship. One reason the term “legal separation” is misleading is because married people can go to court to get a judgment of legal separation, which is different than being “legally separated”. A judgment of legal separation can provide for all the relief a judgment of dissolution provides, except for changing the parties status from married to single. Because people’s actions and statements regarding their intentions regarding their marriage can be ambiguous, it is best to consult a family law specialist to evaluate your circumstances if you need to know if you are legally separated or not. Legal separation has important financial consequences in a dissolution case.

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How long does it take to get a divorce in California

If the parties are in agreement, a judgement can be submitted to the court as quickly as the papers can be prepared. For most attorney’s or parties, this means at least a few days. How long it takes for the clerk to process the papers depends upon the county. For most counties in these budget crisis times with courts closed during some days each month, this can be up to six weeks or more. Under California law, the court cannot change the status of the parties until six months after service or acceptance of service of the summons. When the paperwork is done immediately, the judgment will have a future date in it when the parties status is changed from married to single. No hearing is required, and the parties will simply be single after the date stated in the judgment passes.

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If I am not living with my spouse can I date or will it affect my divorce settlement

From a legal standpoint, parties can date after separation, or even before separation for that matter, and it will not affect your family law case in most instances. If there are children involved, getting new parties involved in the children’s lives is not a good idea. Do not introduce new parties to the children as it will only cause problems in most instances and it can impact the custody and parenting orders. From a practical standpoint, nothing sets off a soon to be ex spouse more than a new party dating their soon to be former spouse. It can heighten emotions and make settlement more difficult.

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Is there a waiting period for Prenuptial Agreements?

In order to be enforceable, a prospective spouse must be given at least 7 days to review a Prenuptial Agreement before signing. This is to give the prospective spouse time to seek legal advice and to review the agreement. Of course it is better practice to give the prospective spouse more time if possible, as it is not always possible to get in to see a family law attorney to review the agreement within 7 days. Also, more time may be needed if there are requested changes. Don’t wait until the last minute to submit a prenuptial agreement to your prospective bride!

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Will hiding my assets protect them from creditors?

No. Once a creditor has a judgment against you, you will be forced by the court to disclose the location of your assets under penalty of perjury. To not disclose the location of your assets, or to not tell the truth may subject you to criminal penalties. Property drafted asset protection agreement or agreements are designed to be fully and truthfully disclosed, and still protect your assets from seizure.

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If a lawsuit has already been file against me is it too late to do anything to protect my assets from seizure?

No. If you already have a claim filed against you, and you have assets to satisfy the claim, to do nothing is to almost certainly assure that you will be required to pay the claim. If you seek expert advice and devise a well conceived plan, you may be successful in protecting your assets, and certainly will improve your negotiating position. The worst that can happen is that your plan will not work, and you will have incurred the legal and accounting fees in setting up the plan.

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Does holding my assets, like my business, in a corporation protect my assets from creditors?

Generally No. A corporation only protects your personally held assets from claims against your corporation, but not against you. In addition, most creditors who loan money or supply services to a corporation will get personal quarantees from the business principles before extending credit. Finally, if a successful claim is made against you, your stock in the corporation can be seized to satisfy the claim.

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Are there other ways than Transmutation Agreements and Post Nuptial Agreements to protect my assets from creditors?

Yes. One vehicle is by forming an LLP (Limited Liability Partnership) to hold your assets. Although it is quite technical, there are many advantages to holding title to your assets in an LLP as opposed to a corporation. It is also possible to set up a foreign trust to hold title to your assets. Although none of these vehicles can provide 100% assurances that your assets will be protected from creditor claims, the goal is to make it so difficult and expensive to challenge your estate plan that most creditors will simply abandon the claim, or be unsuccessful in thier collection efforts. It has been estimated that 2/3 of creditors faced with a well drafted asset protection agreement will abandon the claim, and that only a small percentage of the remaining 1/3 will be succesful.

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Do I need expert help to create agreements to protect my assets?

Yes. Under California law, marital agreements are subject to the same “Fraudulent Transfer” statutes as other agreements, and a carefull evaluation of your assets and liabilities is necessay to draft an agreement that will, if necessary, stand up in court.

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