Georgina Montgomery: Excellence In The Courtroom
Posted on July 19, 2024
Originally, spendthrift trusts were established to protect reckless heirs from squandering their inheritances to creditors. Unfortunately, this tool works best if the DAPT is in place 2-4 years before the judgment against you. However, DAPTs can also protect the home should the courts come after it.
Rather than subject the property to a lien, the defendant can remove equity by replacing it with a loan. Similarly, some homeowners create a shell company to place a lien on the property, giving the general impression that there is no equity. This strategy won’t hold up in a court battle, but it can sometimes dissuade lawyers or creditors from probing much further.
Twenty-four states, including Virginia, allow special protection for married couples. When a personal residence is titled as “tenancy by the entirety,” a single spouse cannot dispose of the property by their sole act. Further, a creditor cannot attach a lien to the property held by both spouses, and the title can pass from one spouse to the other following death without passing through the estate.
Putting the home in a spouse’s name can protect the domicile from seizure, particularly if the spouse works in a “high-risk” profession such as a surgeon or small business owner. However, this is another strategy best pursued before legal trouble arises.
Umbrella insurance protects clients from a wide range of possible scenarios. Generally, umbrella insurance will not cover fraudulent, criminal, reckless, or even negligent actions, but it depends on the specific policy language. This type of insurance can buy $1-2 million in coverage for $300-$500 a year.
