How do I protect my home and assets from medical expenses?

After insurance possible medical expenses.

Asked on December 26, 2017 under Bankruptcy Law, Arizona


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

In advance of having the procedures done and incurring the costs, you could take steps to protect them by putting them into a trust or LLC, so they are not owned by you: debts against you would not be debts against the trust or LLC, so long as the proper LLC or trust formalities were observed. You could transfer assets to family or frienes. You could also give your children (if any) or other heirs/beneficiaries a "remainder" interest in real estate while keeping a "life estate" for yourself--you would be able to live there for the balance of your life, while the beneficiaries get the property when you move out or pass away; splitting ownership like this makes it harder for creditors to reach the property. Of course, there are consequences to giving up ownership or control of your assets, so it may not be the best choice--giving up control or ownership may have negative impacts outweighing the protection your hope to get. (For example: if an asset is given to a family member, they own it, not you--they could sell it, remove you from property, etc. If put into a trust, the trustee, not you, controls it. If you do a remainder interest/life estate, it makes selling or mortgaging the property very difficult, if not impossible. Etc.)
However, if the treatement/procedures/care has been done and/or is already scheduled/planned, it is too late to protect assets: there is a law, adopted in every state, called the "Uniform Fraudulent Transfer Act," that lets creditors "undo" transfers of assets done to hide or protect assets, if such were done with knowledge of an existing or pending debt. The law does not you hide assets from your creditors. Once you know of a debt, the only fully legal transfers are sales for fair market value--the idea is that since you got full value, the creditors have recourse to the money you received.

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