Bloomberg.com reported on April 13, 2005 as follows:
Maurice “Hank” Greenberg transferred $2.2 billion of American International Group Inc. shares to his wife four days before an accounting probe forced his ouster as chief executive officer of the insurer.
Greenberg, who ran AIG for almost 40 years before stepping down last month, made the gift of 41.4 million AIG shares to Corinne P. Greenberg on March 11, according to a regulatory filing yesterday. The shares represented 96 percent of the former CEO’s direct ownership stake in the New York-based company, the world’s largest insurer.
The shift may be an attempt to guard the couple’s wealth from lawsuits that might stem from the investigation by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission, said former federal prosecutor Christopher Bebel. AIG has lost almost $52 billion of market value since the company disclosed accounting subpoenas on Feb. 14.
“He probably did it on the advice of counsel as a precautionary measure, “ said Bebel, who now practices law in Houston. The transfer may help shelter assets against civil suits and “put these assets beyond the reach of prosecutors,” Bebel said.
Without confirming or denying the opinion of the Houston attorney, if Illinois law were to apply the transfer will be too late to shield the assets from the claims of creditors, be they government agencies or plaintiffs who successfully prove wrongdoing on the part of Greenberg.
The reason is there is a substantial likelihood a plaintiff will be able to show that a lawsuit loomed, and that Greenberg’s transfer was made with the intent to hinder or delay his existing or potential creditors. The issue is “intent,” i.e., the motivation for the transfer. What was the “state of mind” at the time of the transfer?
Illinois has adopted the Uniform Fraudulent Transfer Act which allows creditors four years to set aside a fraudulent conveyance.
Asset protection includes, but is not limited to, a review of the specific law of the state governing the asset to be protected; the income and estate tax consequences relating to any prospective transfer of ownership of an asset; and changing laws, such as those relating to self-settled trusts, tenancies by the entirety, and marital and non-marital property. Asset protection can only be effectively accomplished in conjunction with a current review of your estate plan.
The bottom line: the best time to asset protect is prior to the likelihood of any action that gives rise to a claim.