Protecting assets

[davemartin]

Hi all,

I have paid off my mortgage for my house, and was wondering if there is any way I can put it beyond the reach of creditors or people trying to sue me for any reasons ;).

I have 2 children aged 18 and 28, and if there is such a method, can I take it out of protection at a later date if necessary?

If this involved putting it in a trust fund or similar for my children, could they be sued and as such have this asset as a liability?

I haven't got a clue about the law in this area at all, so I really am fumbling around in the dark.

Thanks,

Dave

[WendyS]

As they are both adults I would assume that you could transfer it into their joint names, but as you are talking about creditors, I sense that you may have other financial problems, in which case, talking to a solicitor would seem the sensible thing to do before taking any specific action which you might regret later, especially if your children then decide to take unilateral action, sell it and go off on a giant spending spree. I imagine that if you died within seven years, there might also be an inheritance tax issue for your children if its value is over the threshold level. A solicitor is the best person to advise on trust funds and similar means of protecting assets.

[davemartin]

To expand upon my original post. (I have no legal or credit problems at the moment)

I am self employed as a Martial arts instructor and have public liability insurance. My fear relates more to being sued for a purpose that outside the scope of my liability insurance.

Thanks for your reply Wendy

[themas]

This can be very complex & I agree with Wendy - you need legal advice if you want to do anything.

Putting the house in your childrens' names could have adverse consequences in future - e.g. if they bcame bankrupt it would be taken as an asset of theirs, or if they had a relationship breakdown it could be treated as an asset to be shared with an ex-partner in a divorce. There could also be capital gains tax implications.

If you were sued successfully and not covered by insurance the person suing you could bankrupt you. The Official Receiver would then look into your financial affairs going back at least five years and could undo any transaction if it was considered to have been done to put assets beyond your creditors reach.

[Hgrove]

I do not believe what you propose is possible: as a matter of public policy, I suspect the law does not allow individuals to protect their assets against potentials creditors/claimants. If you were to create a trust with your children as beneficiaries, and a claim was then successfully made against you, it is likely the court would regard the trust as a "sham" created with the intention of "cheating" the claimant out of his/her compensation. Rich people get round this problem by transferring their assets out of the jurisdiction but if your house is your only or main asset this is not really an option for you. In any event there are an awful lot of tax and legal implications in creating such a trust and also in giving the house outright to your children. I believe your best bet is to try and purchase the most comprehensive insurance you can find and/or top up cover.

[davemartin]

Thanks all, last err, part of the saga, i only own 50% of the house, can i transfer it to my wife (who owns the other 50%) ? and would her assets be liable for any case against me, under the eyes of the law?

[themas]

I assume you mean the legal title to the house is in the joint names of yourself and your wife. This is not necessarily the same as the beneficial ownership. For example (an extreme one), if you had married last week and bought a house outright (without a mortgage) in joint names but you put in all the money and your wife put in nothing then your beneficial share would be more than 50%. However, if you had done this 25 years ago and your wife had lived there with you and brought up your children she would have accrued a beneficial interest over time - even if her name was never on the title deeds. With this concept it can be difficult to know what % share each party owns (in divorces it is often decided by the judge) and it can be looked at in different ways in different circumstances.

It follows that in your case your beneficial interest is not necessarily 50% - it could be more or less depending on your circumstances. If you were bankrupted by a creditor the Official Receiver would look at the beneficial interest and not just the legal title. (The same might happen if you were sued in the County Court and had to give full details of your finances.) Also, the Official Receiver would look into whether you had transferred the legal title in an attempt to put an asset beyond the reach of your creditors.

So you certainly can't assume you would be on safe ground by transferring the legal title entirely to your wife - its possible you might be OK if several years had passed before a creditor came after you but by no means certain.

[davemartin]

Many thanks everybody, I am much wiser for it!

[GeneAdams73]

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