By Dan Barney
Estate planning and law
“How can I protect my assets from creditors? Last week, we looked at two sources of protection: A) transferring assets from your personal possession and B) protecting a minimum amount of assets under Oklahoma’s homestead laws. These include special protections for annuities and qualified retirement plans.
There are several other mechanisms to protect assets in Oklahoma, some of which are more effective than others.
A. Transfer to Spouse. In situations where one spouse is more exposed to risk and liability, it is sometimes advisable to transfer the assets to the lower risk spouse.
This is often the case when one of the spouses owns or operates a business, which can result in personal liability for that spouse. This is usually the case when you have heard that a person has “placed his house and property in his wife’s name”.
However, this method is often misunderstood due to confusion as to the joint and several liability of the spouses. This concern is much lower in Oklahoma because it is not a communal property state and therefore each spouse can independently own separate assets.
This should be contrasted with the laws of “community ownership” states such as Texas, Arizona, New Mexico, and California, where joint ownership is presumed in the structure of the laws.
It should be noted, however, that an effective separation of assets between spouses must be carefully planned and implemented to ensure that those assets achieve the desired goal of single spouse ownership.
B. Joint Ownership – Joint Ownership with Right of Survivorship. A related issue that can also be misunderstood is that of co-ownership of property by spouses or others.
The fact that the property is held jointly by the spouses is not an absolute protection for either spouse because often both spouses are responsible for the debts of the marriage.
In addition, the part of the property that belongs to one of the spouses remains subject to the claims of the creditors of this spouse. The protection obtained stems mainly from the complications imposed on the collection or seizure of a distinct right.
A more direct protection, however, is the “right of survivorship” that can be attached to joint ownership.
This survival results in the instantaneous transfer of ownership to the survivor upon death and may escape claims by creditors against the deceased.
In any event, it should be noted that debts that have been secured by the property itself as security for that debt cannot escape liability.
This means, for example, that if a mortgage is attached to the purchase of a house, this mortgage can only be extinguished by a release from the mortgagee, i.e. (bank or loan company), that the title is indivisible and despite the death of one or other of the joint tenants.
Next week, an additional way to protect assets in Oklahoma.