          
          
          
                       THE ART OF THE IMPOSSIBLE
          
               The solution requires a digression through estate
          planning.  This is necessitated by the laws and
          procedures that have evolved to protect creditors from
          certain common and proscribed acts by debtors.  So
          first lets examine what cannot be accomplished.
          
          Badges of Fraud
               All 50 states have laws that guard against the
          common practice of dodging judgments by transferring
          assets.  Example: Dr. Paul gives Mrs. Paul all of his
          assets.  He tells his judgment creditor "all I have is
          yours, but..."  This does not work.  any transfer made
          for less than valid consideration can and will be
          undone.  The transferee (Mrs. Paul) will be treated as
          a trustee for the transferor (Dr. Paul).  The court
          will unzip the transfer without a degree of difficulty
          and the value of the asset will be available to satisfy
          the judgment.  Any transfer that leaves the transferee
          insolvent or substantially unable to pay his current
          creditors may be treated as a fraud on the creditors.
          However, there is no prohibition on the transfer of
          assets to a different form of ownership, such as into a
          corporation or partnership.  There are several tests
          that determine that a transfer does not have the badges
          of fraud, and the transferor must pass all of them; in
          this case a transfer is guilty until proven innocent!
          As part of an estate plan it is permissible to transfer
          assets to a family limited partnership provided that
          you receive back an equal value of the partnership
          itself.  In other words, instead of owning $1,000,000
          of real estate in fee simple which is easily attachable
          by your creditor, owning $1,000,000 of limited
          partnership interest is not a fraud on creditors; any
          resulting difficulty in attachment is a result of the
          laws of partnership and does not wear any badges of
          fraud.
          
          The Thin Corporate Veil
               The use of a corporation to shield one from
          liability may be crucial and effective. Too often,
          however, a corporation is only usable as a first line
          of defense, while many individuals mistakenly
          completely rely on it.  The first problem is that the
          corporation may be penetrated (piercing the corporate
          veil is the legal term) exposing all officers,
          directors, and even shareholders to direct and personal
          liability.  Many minor failures on the corporate
          owner's or officer's part may lead to its failure in
          asset protection.  Such failures include, but are not
          limited to:
               1) Failure to ever capitalize the corporation --
          did you really pay for the stock?
               2) Failure to hold annual meetings -- did you stop
          treating the corporation as a separate entity?
               3) Commingle the corporate bank accounts with your
          individual check book - do you occasionally (or
          frequently) use the corporate checks or credit card to
          fund personal expenses?
               4) Fail to file all necessary corporate papers
          with the state - have you ever done business in
          California with your Nevada corporation, or in New York
          with your Delaware corporation?
               5) Failure to keep all incorporation papers
          current - have you filed your corporate reports with
          your state of incorporation.
               6) Failure to file tax returns - your inactive
          corporation didn't need one?  Well, now it does!
               7) Failure to hold corporate meetings - do you
          corporate minutes reflect the type, change in, and ebb
          and flow of your business.
               If you cannot correctly answer all of the above,
          then your corporation may not provide the shelter you
          expected of it.
          
          The Folly of Corporate Control
               Over the years substantial abuses have been
          visited upon shareholders of corporations by
          "insiders."  As a result any majority of shareholders
          have the right to force the sale of the corporation,
          its dissolution, distribution of assets, etc.  As a
          share of stock is an item of personal property, similar
          to a bank account, certificate of deposit, or cash, it
          can be ordered sold, or, in effect, transferred to the
          creditor, to (partially) satisfy a judgment debt.  Thus
          a person who hides behind corporate ownership may soon
          find himself the former owner, or, the president voted
          out of office.
          
          Worthless Insurance
               Less than one in a hundred readers of this report
          have actually read their insurance policies.  Insurance
          companies are in business to make money.  They do this
          by limiting risks.  Probably only one in five know
          where they are to read them if they wanted to.  Most
          insurance covers you for only a portion of the risks
          that you assume.  For example, if you are sued because
          of unlawful discharge of an employee (average verdict:
          $300,000) are you covered?  Does your automobile
          coverage protect you when you drive your vehicle off
          road to a picnic site?  The fire that started in your
          bushes and spread to your neighbor's property - are you
          covered?  Are your limits adequate, or were they set
          years ago and never adjusted?  Make sure that you have
          a separate Umbrella Coverage policy that fills in the
          cracks left by your other policies.  Many people in the
          United States have recently found that the coverage
          afforded by their medical plans was no better than the
          financial well being of their now defunct insurance
          companies.  After the savings and loan mess, are we
          absolutely sure that the insurance industry is fiscally
          sound?
          
          
