Michigan Asset Protection Lawyer Blog

Most of my asset protection planning clients are not criminals...but some are. They have been convicted of health care fraud, tax evasion, Builder's Trust Fund Act violations, insurance fraud and so forth...and, interestingly, we can usually help these people. But what is the impact when someone pleads guilty to a criminal act in order to achieve a quick and acceptable settlement but the act was actually an accident and unintentional. According to Jason Byrne in his article in the December 2007 Michigan Bar Journal, "How a Criminal Plea Can Result in the Loss of Insurance Coverage" be very careful or you can lose your insurance coverage. Jason points out how in several cases where the defendant claimed the act was an accident the prosecutor claimed it was intentional and to settle the case the defendant pled to a minor crime avoiding incarceration. However, when the victim later sues civilly to recover damages and the "criminal" looks to his insurance carrier for defense and coverage, the insurer denies coverage on the basis that it will not pay for any loss "arising out of a criminal act or omission." There are different types of exclusions that insurers use, as pointed out in the article, but one thing is clear, the criminal lawyer looking for a "best deal" may be far better off having the client enter a plea of nolo contendere rather than an affirmative plea of guilty.

Thanks to Professor Adam J. Hirsch's article entitled "The Uniform Acts' Loophole in Fraudulent Conveyance Law in the December 2007 edition of Estate Planning Journal, we in the asset protection community now have a new strategy that can be invoked. It's weird and maudlin but could work under some circumstances...particularly when we are faced with overwhelming claims and the UFTA is blocking us every place we turn. Here's the Cliff Notes rendition. The law is split on whether disclaimers are transfers and therefore subject to fraudulent transfer law. However, Professor Hirsch claims a disclaimer is not a transfer, a key prerequisite for UFTA coverage. This leaves open the following planning scenario: Debtor establishes a joint account with terminally ill accomplice (doesn't sound good but that's what he is) who lives in a state that has adopted the Uniform Disclaimer of Property Interests Act (UDPIA). Debtor puts in all the assets. Accomplice dies and under the UDPIA Debtor can disclaim up to 50% of the account. Accomplice's will provides for the property in the joint account to pass to Debtor's suggested heirs. Result: 50% of assets deposited into the joint account avoid being reached by Debtor's creditors. While there are only 14 jurisdictions that have adopted UDPIA, Michigan not being one of them, if you find a willing partner in one of the available jurisdictions the scheme may work.