The following is an outline of the various legal issues that can arise when creating an asset protection plan. Moreover, this list contains some of the various laws that can be violated through careless planning, with severe consequences.
Bankruptcy is a difficult area for asset protection planning, considering the wide reach of bankruptcy trustees, as well as look-back period for fraudulent transfers. Under 18 U.S.C.A. § 152 anyone who knowingly conceals property from a trustee, makes a false oath, false claim, provides false evidence or alters, destroys or mutilates evidence, can be fined and/or imprisoned for up to five years.
Under 26 U.S.C.A. § 7206 anyone who willfully makes statements on any return, conceals property with intent to defraud, or who counsels someone to makes such false statements or commit such fraud, is guilty of a felony and can be fined $100,000 and or imprisoned for up to three years. 26 U.S.C.A. § 7212 provides fines and imprisonment to those who attempt to obstruct or interfere with the administration of tax laws.
3. RTC and FDIC
Under 18 U.S.C.A. § 1032 one can be fined and/or imprisoned for concealing assets or impeding “the Federal Deposit Insurance Corporation, acting as conservator or receiver or in the Corporation's corporate capacity with respect to any asset acquired or liability assumed by the Corporation under section 11, 12, or 13 of the Federal Deposit Insurance Act, the Resolution Trust Corporation, any conservator appointed by the Comptroller of the Currency or the Director of the Office of Thrift Supervision, or the National Credit Union Administration Board, acting as conservator or liquidating agent.”
4. Money Laundering
Attempting to hide the source of money or failing to properly report money transactions can result in fines and imprisonment. Under 18 U.S.C.A. § 1957, a person who engages in a monetary transaction in criminally derived property greater than $10,000.00 can be fined and/or imprisoned.
5. Defraud the United States
18 U.S.C.A. § 371: “Conspiracy to commit offense or to defraud United States: If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both. If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.”
6. Mail and Wire Fraud
18 U.S.C.A. § 1341: This section punishes those who commit fraud using mail and wire transactions.
18 U.S.C.A. § 1962 “Racketeer Influenced and Corrupt Organizations.” The RICO laws enumerate severe civil and criminal penalties for using entities to further crimes, fraud, etc.
8. Misprision of felony
18 U.S.C.A. § 4 : “Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.”
9. Uniform Fraudulent Transfers Act
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.
Therefore, there are numerous laws prohibiting the fraudulent transfer of assets, including ones prohibiting using the mail or wires or hiding the transactions in entities. Remember as well that the courts have broad powers to allow discovery and force disclosure of assets. Any asset protection plan adopted must take into account these laws and must be able to survive the light of day, as hide the ball strategies may fail with determined creditors, and anger courts.