Paterno house transfer won't shelter him, The New York Times reported yesterday that Joe Paterno transferred ownership of his house in July to a trust, less than four months before the recent sexual abuse scandal erupted. Mark Viera and Pete Thamiel, who wrote the story, did some good old-fashioned shoe leather reporting. They got public records, filed in Centre County, Pa., showing that on July 21, Paterno’s house near campus was turned over to “Suzanne P. Paterno, trustee” for a dollar plus “love and affection.” Previously, they report, the couple had been joint owners of the house, bought in 1969 for $58,000 and now worth $594,484.40.
Here’s what the story doesn’t tell us, but readers need to know: if, as a result of the scandal, Paterno is sued and found to be personally liable, the July transfer would probably not stop the house from being used to satisfy a judgment against him.
The reason stems from state and federal laws that prohibit what are called fraudulent conveyances: transfers of assets made with the intent to hinder, delay or defraud creditors (those are legal buzz words in italics). Creditors include everyone from disgruntled spouses and ex-spouses to people who win lawsuits against you. If a court finds there has been a fraudulent conveyance, it can declare the transfer void and order the assets be made available to creditors.
Lawyers routinely split hairs about what’s a fraudulent conveyance. There are no hard-and-fast rules that spell out what the term means — it is applied on a case-by-case basis. But as a rule of thumb, you must transfer the property before there is even a hint of trouble on the horizon. Details of the Penn State scandal that led to Paterno’s being fired as the football coach at the university last week are still unfolding. But we have every reason to believe that there was trouble on the horizon long before the house was transferred. Therefore, if there is a judgment against him, it wouldn’t take much legal wrangling to convince the court that the house is fair game.
There’s a lesson there, but it has nothing to do with the latest sex scandal. The take-away is that preserving resources for yourself or future generations goes beyond sound investment and money management. You also need to guard against losing assets to creditors.
The best defense is to erect a variety of roadblocks that make it difficult, if not impossible, for creditors to reach your money and property. These asset protection strategies, as they are called, can range from relying on state-law exemptions to creating multiple barriers through the use of trusts and family limited partnerships or limited liability companies.
When thinking about asset protection, consider your net worth, as well as the potential liability that surrounds your profession. Take account not only of assets you already own, but wealth that you might inherit or generate in the future – for example, if an existing or startup venture is sold or goes public. Depending on your situation, it may be possible to rely on a variety of strategies, either separately or in combination with each other.
Among the many people who might benefit from asset protection are those whose work could generate lawsuits: doctors, lawyers, accountants, construction contractors and real estate developers; executors and trustees; and directors of public companies. A well-constructed asset-protection plan may guard against risks not covered in your malpractice, errors-and-omissions, property and casualty and other insurance policies.
Keep in mind that in tough economic times, people find reasons to sue. It’s prudent to ensure you are not an easy target.
Asset protection does not inoculate people who commit crimes. But it may insulate those who did business with a crook and can demonstrate they did not know of the crime – provided they took asset protection measures long before the crime came to light. That has become an issue in the aftermath of the Bernard L. Madoff Ponzi scheme. Paterno home sold for $1, Paterno $1, Joe and Sue Paterno, Joe and Sue Paterno, Jerry Sandusky, Joe Paterno sold home in move that could protect assets, paterno house transfer won't shelter him,
An ideal time to address the issue of asset protection is in the course of creating or revising an estate plan. It is possible that some of your assets are already beyond the reach of creditors, and others could be, with minor adjustments. Wick Sollers, a lawyer for Paterno, told The Times in an e-mail that the Paternos had been engaged in a “multiyear estate planning program” and the transfer of the house was part of it. I don’t doubt that. But let’s not overestimate its effect.
Source:forbes
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