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Over the last few years, the “asset protection” industry has grown exponentially. In his article “Hiding Assets in California,” authored for The Bankruptcy Strategist, Member David Goodrich discusses the three common asset protection tools—trusts, business entities and marital agreements—and why they commonly fail.
Though the Internet provides an abundance of advice for protecting assets from creditors and bankruptcy trustees, most asset protection advice fails to take into account the consequences of a Chapter 7 bankruptcy filing, should asset protection counter-measures be implemented. “It is important to note that nearly all asset protection tools fail because of the one-two combination of the right-hand jab of 11 U.S.C. § 548/Cal. Civ. Code §§ 3439.04/3439.05 and the left-hand upper-cut of § 522(g),” Goodrich writes.
Goodrich concludes the article by noting that to properly protect an asset in California, it’s generally best to understand and maximize exemptions, rather than to rely on dubious asset protection advice that could have serious consequences down the line.